ACA marketplace health plan enrollees could face 'subsidy cliff' in 2026 — here's how to avoid it
This could affect millions of Americans, including students, self-employed or contract workers and younger retirees, who buy marketplace insurance and claim the so-called premium tax credit, which makes coverage cheaper.
The enhanced benefit is set to expire at the end of the year. If it does, some enrollees could face a "subsidy cliff," which eliminates the premium tax credit entirely, once income exceeds certain thresholds, financial experts say.
More from Personal Finance:Trump's 'big beautiful bill' includes these key tax changes for 2025Student loan bills to double for some borrowers as Biden-era relief expiresWhat a Trump, Powell faceoff means for your money
If you pass the threshold by even $1 and lose the credit, "costs could go up by hundreds of dollars a month," said certified financial planner Cathy Curtis, CEO of Curtis Financial Planning in Oakland, California.
But precise income projections can be tricky, said Curtis, who is also a member of CNBC's Financial Advisor Council.
The average ACA enrollee saved roughly $700, about 44%, from the enhanced premium tax credit in 2024, according to November research from the Center on Budget and Policy Priorities, a nonpartisan policy organization.
Enacted in early July, President Donald Trump's "big beautiful bill" made permanent the Republicans' 2017 tax cuts. But it did not extend the enhanced ACA subsidies passed via the American Rescue Plan in 2021. It's unclear whether the GOP-controlled Congress will consider such a measure before year-end.
Here is a breakdown of what to know about the premium tax credit and how to avoid the "subsidy cliff" if enhancements expire after 2025.
If you're eligible for the premium tax credit, you can use it to reduce monthly ACA premiums upfront or claim the credit on your tax return.
The tax break was originally for enrollees earning between 100% and 400% of the federal poverty level. But the American Rescue Plan expanded eligibility above 400%.
For 2025, that threshold was $103,280 for a family of three, according to The Peterson Center on Healthcare and KFF, which are both health-care policy organizations.
For 2025, more than 22 million people — about 92% of enrollees — receive premium tax credits, according to KFF.
That group could be "significantly affected in 2026" if Congress doesn't extend the larger benefit, said Tommy Lucas, a CFP at Moisand Fitzgerald Tamayo in Orlando, Florida.
It's important to run tax projections for 2025 and 2026 if premium tax credit changes may affect you, experts said.
If you're receiving the tax break for 2025 with earnings over 400% of the federal poverty level, you could explore ways to reduce 2026 income, Lucas said.
For example, you may consider accelerating 2026 income into 2025, tax-loss harvesting or claiming a deduction for health savings account contributions, he said.
If the bigger premium tax credit expires for 2026, "we're going to have to monitor [income] on a pretty regular basis, at least quarterly, if not monthly" to avoid the cliff, Lucas said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
24 minutes ago
- Yahoo
US stock futures higher after Trump strikes trade deal with EU
U.S. stock futures are higher after President Donald Trump struck a trade deal with the European Union ahead of an Aug 1 deadline. The deal includes a 15% tariff on most European goods entering the U.S., similar to agreements struck recently between Trump and other major trading partners, including Japan. The levy is higher than the 10% rate sought by Europeans but less than the 30% Trump threatened earlier in July. Pharmaceuticals, steel and aluminum aren't included in the tariff deal. Additionally, the EU will invest $600 billion in the U.S. and buy $750 billion worth of U.S. energy, Trump said. "More adverse scenarios seem to have been avoided, for now, and this is excellent news but whether everything will now be 'big and huge' still remains to be seen," said Carsten Brzeski, global head of macro for Dutch bank ING. At 6 a.m. ET, futures tied to the blue-chip Dow rose 0.17%, while broad S&P 500 futures added 0.26% and Nasdaq futures rose 0.45%. Separately, the U.S. and China are expected to extend their tariff truce by another three months, the South China Morning Post reported. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng plan to have talks in Stockholm. Busy week ahead With a trade deal with the U.S.' largest trading partner easing tariff fears, investors will turn to earnings and the Federal Reserve's policy meeting for more direction. More so-called Magnificient Seven influential megacap technolgy companies are due to report quarterly results. They include Facebook parent Meta, Microsoft. Amazon and Apple. With about 30% of S&P 500 companies having reported results, overall quarterly earnings are on track for a 7.7% increase from a year ago, according to LSEG IBES. That's higher than the July 1 forecast for a 5.8% increase. Meanwhile, virtually no one expects the Fed to lower rates this week but investors will look for clues on when it might. The Fed has said with the economy showing resiliency, it would wait to see how Trump's tariffs play out before moving rates. At the end of the week, after the Fed's meeting, investors will see more inflation data and the key monthly jobs report to see if the labor market continues to hold up despite the Trump's back-and-forth tariff barbs over the past few months. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday. This article originally appeared on USA TODAY: US stock futures higher after Trump EU trade deal Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
24 minutes ago
- Yahoo
Europe reacts with mix of relief and concern to US trade deal
By Philip Blenkinsop and Sudip Kar-Gupta BRUSSELS (Reuters) -European governments and companies reacted with both relief and concern on Monday to the framework trade deal struck with U.S. President Donald Trump, acknowledging what was seen as an unbalanced deal but one that avoided a deeper trade war. The agreement, announced on Sunday between two economies that account for almost a third of global trade, will see the U.S. impose a 15% import tariff on most EU goods - half the threatened rate but much more than what Europeans hoped for. Many of the specifics of the deal were not immediately known, however. "As we await full details of the new EU–U.S. trade agreement, one thing is clear: this is a moment of relief but not of celebration," Belgian Prime Minister Bart De Wever wrote on X. "Tariffs will increase in several areas and some key questions remain unresolved." Trump said the deal, including an investment pledge topping the $550 billion deal signed with Japan last week, would expand ties between the trans-Atlantic powers after years of what he called unfair treatment of U.S. exporters. It will bring clarity for European makers of cars, planes and chemicals. But the EU had initially hoped for a zero-for-zero tariff deal. And the 15% baseline tariff, while an improvement on the threatened rate of 30%, compares to an average U.S. import tariff rate of around 2.5% last year before Trump's return to the White House. European Commission chief Von der Leyen, describing Trump as a tough negotiator, told reporters on Sunday that it was "the best we could get". European stocks opened up on Monday, with the STOXX 600 at a four-month high and all other major bourses also in the green. Tech and healthcare stocks led the way. "The 15% rate is better than the market was fearing," said Jefferies economist Mohit Kumar. German Chancellor Friedrich Merz welcomed the deal, saying it averted a trade conflict that would have hit Germany's export-driven economy and its large auto sector hard. MORE CLARITY, BUT 'NOT THE END OF THE STORY' French government ministers said on Monday that the deal had some merits - such as exemptions they hoped to see for some key French business sectors such as spirits - but was nevertheless not balanced. Industry minister Marc Ferracci stressed more talks - potentially lasting weeks or months - would be needed before the deal could be formally concluded. "This is not the end of the story," he told RTL radio. European companies, meanwhile, were left wondering whether to cheer or lament the accord. "Those who expect a hurricane are grateful for a storm," said Wolfgang Große Entrup, head of the German Chemical Industry Association VCI. "Further escalation has been avoided. Nevertheless, the price is high for both sides. European exports are losing competitiveness. U.S. customers are paying the tariffs," he said. Stellantis shares were up 3.5% and car parts maker Valeo jumped 4.7% while German pharma group Merck KGaA rose 2.9%, in a sign of relief for those sectors. Among the many questions that remain to be answered, however, is how the EU's promise to invest hundreds of billions of dollars in the U.S. and steeply increase energy purchases can be turned into reality. It was not immediately clear if specific pledges of increased investments were made or whether the details still must be hammered out. And while the EU pledged to make $750 billion in strategic purchases over the next three years, including oil, liquefied natural gas (LNG) and nuclear fuel, the U.S. will struggle to produce enough to meet that demand. While U.S. LNG production capacity is due to almost double over the next four years it will still not be enough to ramp up supplies to Europe, and oil production is expected to be lower than previously forecast this year. Despite the lingering unknowns, analysts stressed the deal still helped decrease uncertainty. Oil prices rose on Monday, as did the euro. "Now that there is more clarity, you would think that not only in the United States, but around the globe, there will be a little bit more willingness to look at investment, to look at expansions, and to look at where the opportunities are," said Rodrigo Catril, senior currency strategist at National Australia Bank. Sign in to access your portfolio
USA Today
25 minutes ago
- USA Today
US stock futures higher after Trump strikes trade deal with EU
U.S. stock futures are higher after President Donald Trump struck a trade deal with the European Union ahead of an Aug 1 deadline. The deal includes a 15% tariff on most European goods entering the U.S., similar to agreements struck recently between Trump and other major trading partners, including Japan. The levy is higher than the 10% rate sought by Europeans but less than the 30% Trump threatened earlier in July. Pharmaceuticals, steel and aluminum aren't included in the tariff deal. Additionally, the EU will invest $600 billion in the U.S. and buy $750 billion worth of U.S. energy, Trump said. "More adverse scenarios seem to have been avoided, for now, and this is excellent news but whether everything will now be 'big and huge' still remains to be seen," said Carsten Brzeski, global head of macro for Dutch bank ING. At 6 a.m. ET, futures tied to the blue-chip Dow rose 0.17%, while broad S&P 500 futures added 0.26% and Nasdaq futures rose 0.45%. Separately, the U.S. and China are expected to extend their tariff truce by another three months, the South China Morning Post reported. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng plan to have talks in Stockholm. Busy week ahead With a trade deal with the U.S.' largest trading partner easing tariff fears, investors will turn to earnings and the Federal Reserve's policy meeting for more direction. More so-called Magnificient Seven influential megacap technolgy companies are due to report quarterly results. They include Facebook parent Meta, Microsoft. Amazon and Apple. With about 30% of S&P 500 companies having reported results, overall quarterly earnings are on track for a 7.7% increase from a year ago, according to LSEG IBES. That's higher than the July 1 forecast for a 5.8% increase. Meanwhile, virtually no one expects the Fed to lower rates this week but investors will look for clues on when it might. The Fed has said with the economy showing resiliency, it would wait to see how Trump's tariffs play out before moving rates. At the end of the week, after the Fed's meeting, investors will see more inflation data and the key monthly jobs report to see if the labor market continues to hold up despite the Trump's back-and-forth tariff barbs over the past few months. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
