If you retire before 65 and buy marketplace health coverage, every dollar of Roth conversion raises the MAGI that sets your premium tax credit. For 2026 this interaction got sharper. The enhanced subsidies enacted by ARPA and extended by the Inflation Reduction Act expired after tax year 2025 (IRA §12001), and the pre-ARPA structure is back: credit eligibility ends at 400% of the federal poverty level. The cliff is binary. At exactly 400% you keep the credit. Past it, the credit is zero, and the repayment caps in IRC §36B(f)(2)(B) no longer apply, so any advance credit paid during the year is owed back in full at reconciliation.
Where the cliff sits in 2026
The poverty guidelines that apply are not the current year’s. Under IRC §36B(d)(3)(B), a coverage year uses the guidelines in effect on the first day of its open enrollment period. Enrollment for 2026 coverage opened November 1, 2025, so 2026 subsidies key off the January 2025 guidelines. A tool that grabs the 2026 guidelines ($15,960 for one person) puts the single-filer cliff at $63,840, which is $1,240 too high. Plan to that number and you forfeit the entire credit by crossing the real line at $62,600.
| Household size | 2025 FPL (contiguous 48) | 400% cliff for 2026 coverage |
|---|---|---|
| 1 | $15,650 | $62,600 |
| 2 | $21,150 | $84,600 |
| 3 | $26,650 | $106,600 |
| 4 | $32,150 | $128,600 |
Sources: 2025 HHS poverty guidelines (90 FR, January 17, 2025); IRS Rev. Proc. 2025-25 for the 2026 applicable percentage table. Alaska and Hawaii use higher guideline amounts.
The credit shrinks before it disappears
Between 100% and 400% of FPL, you are expected to pay a percentage of MAGI toward the benchmark silver plan; the credit covers the rest. The percentage climbs with income through six bands, interpolating linearly inside each band:
| MAGI as % of FPL | Applicable percentage (2026) |
|---|---|
| 100% to 133% | 2.10% |
| 133% to 150% | 3.14% rising to 4.19% |
| 150% to 200% | 4.19% rising to 6.60% |
| 200% to 250% | 6.60% rising to 8.44% |
| 250% to 300% | 8.44% rising to 9.96% |
| 300% to 400% | 9.96% flat |
The last band is the one that matters for most conversion planning. From 300% to 400% of FPL, every added dollar of MAGI raises your required contribution by 9.96 cents. That is a 9.96-point surtax stacked on your bracket: a retiree converting through the 12% bracket in that band faces a true marginal rate of 21.96% before hitting the cliff at all.
A computed example: single, age 60, $40,000 before conversion
Take a single 60-year-old with $40,000 of MAGI, all ordinary income, taking the $16,100 standard deduction. Taxable income is $23,900, solidly in the 12% bracket, with federal tax of $2,620. At $40,000 MAGI (256% of FPL), the applicable percentage interpolates to 8.61%, and against the engine’s benchmark-premium estimate for a 60-year-old ($9,153 per year, a national approximation) the credit is $5,709.
| Conversion | MAGI | Added federal tax | Credit remaining | Combined cost | Effective rate |
|---|---|---|---|---|---|
| $0 | $40,000 | $0 | $5,709 | $0 | n/a |
| $10,000 | $50,000 | $1,200 | $4,173 | $2,736 | 27.4% |
| $20,000 | $60,000 | $2,400 | $3,177 | $4,932 | 24.7% |
| $22,600 | $62,600 | $2,712 | $2,919 | $5,503 | 24.4% |
| $22,601 | $62,601 | $2,712 | $0 | $8,422 | 37.3% |
| $30,000 | $70,000 | $3,950 | $0 | $9,659 | 32.2% |
Combined cost is added federal tax plus credit forfeited relative to not converting. Two things in this table deserve attention.
First, the interior rows. The first $10,000 costs $2,736 (27.4%), more than the second $10,000 at $2,196 (21.96%). The reason: crossing from the 250-300% band into the flat 9.96% band reprices the income you already had. The required contribution on the original $40,000 rises from 8.61% to 9.96% ($540) on top of the 9.96% owed on the new dollars ($996), and the 12% bracket takes its $1,200. Almost nobody prices this repricing effect; it is why conversions near band boundaries cost more than the headline percentages suggest.
Second, the cliff row. Converting $22,600 fills MAGI to exactly $62,600, which is exactly 400% of FPL, and keeps a $2,919 credit. Converting $22,601 keeps nothing. That single dollar costs $2,918.65: twelve cents of federal tax plus $2,918.53 of forfeited credit. Few thresholds in the 2026 individual tax system charge more for one dollar of income. The closest analogue, an IRMAA tier boundary, costs $1,148.40 per person per year at the first tier.
Sizing a conversion under the cliff
The planning rule follows from the table: convert up to the smaller of your bracket headroom and the distance from your other MAGI to the 400% line, unless the tax savings from converting more exceed the one-year credit loss. The trade is sometimes worth it. Forfeiting $2,919 once to move $50,000 out of a traditional IRA that would otherwise come out at 22%+ later can be the right call; the same one-bad-year logic applies to deliberately crossing an IRMAA tier.
Two edges of the window deserve care:
- The cliff has a floor. Below 100% of FPL ($15,650 single), there is no premium tax credit at all; in states that have not expanded Medicaid, early retirees living on cash savings can have too little MAGI to qualify. A small Roth conversion that lifts MAGI above 100% of FPL creates eligibility rather than destroying it. Conversions move MAGI in whichever direction you need.
- Ages 63 and 64 face two thresholds at once. A conversion at 63 counts against this year’s ACA credit and, through the two-year lookback, against your first Medicare premiums at 65. The conversion window from 60 to 72 covers how the thresholds hand off from one to the other.
What the engine assumes
The cliff lines and applicable percentages above are statutory and exact. The dollar value of the credit is not: it depends on the second-lowest-cost silver plan in your rating area, which varies by multiples across the country. The calculator uses a national age-based benchmark approximation ($9,153 per year at age 60) and flags any scenario that crosses the 400% line with an explicit warning rather than burying it in a total. Check your actual benchmark at healthcare.gov before treating the credit amount as precise; the methodology page states this limitation and the others.
Open the calculator
to model a conversion against your own income, the 400% FPL line, and the IRMAA thresholds in one projection. Set age below 65 and the ACA warning fires on any scenario that crosses.