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Tom Werner | Digitalvision | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
Starting in 2026, millions of Americans could see a steep increase<\/a> in the cost of marketplace health insurance \u2014 unless Congress extends a pandemic-era boost that made Affordable Care Act plan premiums more affordable<\/a>.<\/p>\n 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<\/a>, which makes coverage cheaper.<\/p>\n The enhanced benefit is set to expire at the end of the year. If it does, some enrollees could face a \u201csubsidy cliff,\u201d which eliminates the premium tax credit entirely, once income exceeds certain thresholds, financial experts say.\u00a0<\/p>\n More from Personal Finance:<\/strong> If you pass the threshold by even $1 and lose the credit, \u201ccosts could go up by hundreds of dollars a month,\u201d said certified financial planner Cathy Curtis<\/a>, CEO of Curtis Financial Planning in Oakland, California.<\/p>\n But precise income projections can be tricky, said Curtis, who is also a member of CNBC\u2019s Financial Advisor Council<\/a>.<\/p>\n<\/div>\n The average ACA enrollee saved roughly $700<\/a>, 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.<\/p>\n Enacted in early July, President Donald Trump<\/a>\u2018s \u201cbig beautiful bill\u201d made permanent the Republicans\u2019 2017 tax cuts<\/a>. But it did not extend the enhanced ACA subsidies passed via the American Rescue Plan in 2021. It\u2019s unclear whether the GOP-controlled Congress will consider such a measure before year-end.\u00a0<\/p>\n Here is a breakdown of what to know about the premium tax credit and how to avoid the \u201csubsidy cliff\u201d if enhancements expire after 2025.\u00a0<\/p>\n<\/div>\n If you\u2019re eligible for the premium tax credit, you can use it to reduce monthly ACA premiums upfront or claim the credit on your tax return.<\/p>\n 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%.<\/p>\n For 2025, that threshold was\u00a0$103,280 for a family of three<\/a>, according to The Peterson Center on Healthcare and KFF, which are both health-care policy organizations.<\/p>\n<\/div>\n For 2025, more than 22 million people \u2014 about 92% of enrollees<\/a> \u2014 receive premium tax credits, according to KFF.<\/p>\n That group could be \u201csignificantly affected in 2026\u201d if Congress doesn\u2019t extend the larger benefit, said Tommy Lucas, a CFP at Moisand Fitzgerald Tamayo in Orlando, Florida.<\/p>\n<\/div>\n It\u2019s important to run tax projections for 2025 and 2026 if premium tax credit changes may affect you, experts said.<\/p>\n If you\u2019re 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.<\/p>\n For example, you may consider accelerating 2026 income into 2025, tax-loss harvesting<\/a> or claiming a deduction for health savings account<\/a> contributions, he said.<\/p>\n If the bigger premium tax credit expires for 2026, \u201cwe\u2019re going to have to monitor [income] on a pretty regular basis, at least quarterly, if not monthly\u201d to avoid the cliff, Lucas said.<\/p>\n<\/div>\n<\/div>\n\n
Trump\u2019s \u2018big beautiful bill\u2019 includes these key tax changes for 2025<\/a>
Student loan bills to double for some borrowers as Biden-era relief expires<\/a>
What a Trump, Powell faceoff means for your money<\/a><\/p>\nHow the premium tax credit works<\/h2>\n
How to avoid the \u2018subsidy cliff\u2019<\/h2>\n
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