Retire Before 65? Earn $1 Over the Limit in 2027 and Lose Your Health Insurance Tax Credit

Meet an example retiree. She is 61, single, and stopped working last year. In 2027 she plans to live on about $52,000 of income from her IRA and her savings. She wants health insurance until Medicare starts at 65.

Say the benchmark plan in her area costs $1,300 a month, or $15,600 a year. That is the second-cheapest silver plan, the one the government uses to set her tax credit. The price is made up for this example. At $52,000 of income, she gets a tax credit of about $10,286 for the year. She pays about $5,314, or $443 a month.

Now say she also moves $12,000 from her traditional IRA to a Roth IRA in 2027. Her income becomes $64,000. For one person, the 2027 income limit is $63,840, so she is $160 over. Her tax credit drops to $0, and she pays the full $15,600.

Going $1 over the limit and losing the whole credit is often called the subsidy cliff. Congress paused this rule for 2021 to 2025. It returns for 2027.

Below, find your household's income limit, what counts toward it, and your likely 2027 price.

Are the bigger tax credits gone for 2027?

Yes, under current law. From 2021 through 2025, Congress made the premium tax credit larger. It also let people above 400% of the poverty line get help. Those rules were written for tax years 2021 through 2025 only.

As of October 8, 2026, no new law extends them. The tax code still limits the larger credits to those years. The IRS confirmed the 2027 rules in July 2026. They give no credit above 400% of the poverty line.

Congress could still act. If it does, the limit goes away and this article will change. Check HealthCare.gov before you sign up.

Where is the 400% line for my household?

The premium tax credit is a tax credit that lowers your monthly marketplace premium.

The federal poverty line is an income amount the government sets each year. To get the credit, your income must be between one and four times that amount. That is 100% to 400% of the poverty line.

For 2027 coverage, the IRS uses the 2026 poverty line, published January 15, 2026. Your tax household is you, your spouse if you file jointly, and anyone you claim as a dependent. Here are the limits for the 48 states and DC.

The lines are higher in Alaska and Hawaii. The calculator below handles both.

Income exactly at the line still qualifies. One dollar over does not.

How much do I pay if I am under the line?

Marketplace plans come in metal levels. Bronze costs least and gold costs more. Silver is in the middle.

Under the limit, you pay a set share of your income toward a benchmark plan. That is the second-cheapest silver plan in your area for your ages. The tax credit covers the rest of that plan's price.

The IRS sets those shares each year. For 2027 they run from 2.15% of income to 10.22%.

Inside each range, your share rises a little with each extra dollar of income. In most states, income under 138% of the poverty line qualifies for Medicaid instead.

Here is what our example retiree pays at different incomes. The benchmark plan stays at $15,600 a year.

Look at the last two rows. Going from $62,000 to $64,000 raises her cost by about $9,264. That is for $2,000 more income.

Under the expired 2021 to 2025 rules, $64,000 would have cost her about $5,440. If Congress brought those rules back, she would pay about $10,160 less at $64,000.

What counts as income for this test?

The income that counts is called MAGI, short for modified adjusted gross income. Start with the "adjusted gross income" number on your tax return. Then add these three things:

• Social Security benefits that are not taxed
• Tax-exempt interest, such as from municipal bonds
• Foreign income you left off your return

Add together the MAGI of everyone in your tax household who has to file a tax return.

For early retirees, these often count:

• Roth conversions. The taxable amount you move to a Roth IRA counts in full.
• Capital gains. Selling stocks or funds at a profit adds the profit.
• Traditional IRA and 401(k) withdrawals. These count in full.
• Interest and dividends, including from savings and CDs.
• Social Security, all of it, even the part that is not taxed.

Not every dollar you live on counts as income. Cash you already had in the bank is not income. Only the interest it earns is. Taking out your own Roth IRA contributions is generally not income either.

How big a Roth conversion can you do and keep the credit?

A Roth conversion moves money from a traditional IRA to a Roth IRA. You pay income tax on it now. Later withdrawals are tax-free. Many early retirees do them in low-income years. Before 65, each converted dollar also raises the income that sets your tax credit.

Go back to our example. At $52,000, she has $11,840 of room before the limit. If she converts $11,000, her income is $63,000. She pays about $6,439 for the year, about $1,124 more than before. She keeps most of her credit.

If she converts $12,000, she crosses the limit and loses all $10,286 of it.

So size each year's conversion to stop below the limit. Stop a few thousand dollars short. A mutual fund can pay out an unexpected taxable gain in December.

What if my income ends up higher than I guessed?

When you sign up, you give the marketplace an income estimate. The credit is then paid to your insurer each month. This is called the advance credit.

At tax time, the IRS compares that advance credit with what your real income allows. If you got too much, you pay back the difference.

Before 2026, the payback was capped for most people under 400% of the poverty line. That cap is gone. A 2025 tax law removed it for tax years after 2025. You now repay the full difference.

In our example, say she signs up expecting $52,000 and ends the year at $64,000. She owes back the full $10,286 when she files her 2027 taxes.

If your income changes during the year, update your marketplace application right away. The marketplace then adjusts your monthly credit, so you owe less at tax time.

Do rising 2027 prices hurt more if I am over the limit?

Yes. Under the limit, your share is a set percent of income. So when the benchmark plan's price rises, the credit grows to cover the increase. Your cost stays about the same if you buy the benchmark plan.

Over the limit, you pay every dollar of any increase. So staying under the limit protects you from price jumps too.

Prices are rising again. Insurers asked to raise 2027 prices by about 15% in a typical case, Healthinsurance.org reported on September 2, 2026. It also reported insurers leaving the marketplace in more than 20 states. Those are requests, not final prices. Final prices show up on HealthCare.gov when open enrollment, the yearly sign-up period, starts on November 1.

If your insurer is leaving your area, check what plan you will have in 2027. Then pick one during open enrollment.

When can I sign up for 2027 coverage?

On HealthCare.gov, open enrollment starts November 1, 2026. Sign up by December 15, 2026 for coverage that starts January 1, 2027. Open enrollment ends January 15, 2027. Some states run their own marketplace and set their own dates.

Estimate your own 2027 premium

Enter your household size, your expected 2027 income, and the benchmark silver premium from HealthCare.gov. The chart shows what you pay at each income, with the 400% line marked.

You can also run the same 2027 numbers on the standalone ACA subsidy cliff calculator.

What this estimate leaves out

• Monthly rules. The IRS figures the credit month by month on Form 8962 and rounds some steps. Our annual estimate can differ by a few dollars.
• Your exact plan price. Prices depend on your age, ZIP code and the plan you pick. Use the real numbers from HealthCare.gov.
• What you pay at the doctor. A cheaper bronze plan lowers your monthly price. But you pay more of each bill when you get care.
• A change in the law. If Congress brings back the bigger credits, the limit goes away.