What Is the Subsidy Cliff? And How to Know If Your Income Still Qualifies for Help in 2026

If you've been getting help paying for your Marketplace health insurance, you may have heard the term "subsidy cliff." This refers to the income limit where, if you earn even one dollar too much, you could lose all financial help toward your monthly premium. Thanks to temporary rules in place from the American Rescue Plan (ARP) and the Inflation Reduction Act (IRA), this cliff has been on hold—but it could return in 2026.

Let’s break down what this means, how to know if you’re at risk, and what kind of income actually counts toward subsidy eligibility.

What Is the Subsidy Cliff?

Before the ARP and IRA were passed, Marketplace subsidies were only available to people earning between 100% and 400% of the Federal Poverty Level (FPL). That meant if your income went even $1 over the 400% mark, you lost all help. For many families, this could mean an increase of $800–$1,500 or more per month in premiums.

The ARP temporarily removed this cliff and allowed people over 400% of the FPL to still get some help, depending on their age, zip code, and plan prices. This allowed families to not pay over 8-9% of their income towards health insurance premiums. But unless Congress acts, those changes will expire at the end of 2025. If that happens, only people making between 100% and 400% of the FPL will qualify for subsidies starting in 2026.

What Income Counts for the Marketplace?

One of the biggest questions we get is: What income do I use to figure out if I qualify for subsidies?

The answer is: your Modified Adjusted Gross Income (MAGI). This number is used by the IRS and the Marketplace to determine your eligibility for health insurance savings.

Here’s how it works:

• Gross income: This is the total amount you earn from work or other sources before any deductions.

• Adjusted Gross Income (AGI): This is your gross income minus certain adjustments like self-employment deductions, student loan interest, and retirement contributions.

• Modified AGI (MAGI): This is your AGI plus a few items like non-taxable Social Security, foreign income, child support, alimony (sometimes) and tax-exempt interest.

Your MAGI is the number the Marketplace uses. You can usually find your AGI on line 11 of your IRS Form 1040. If you have non-taxable income like Social Security or interest, those amounts may need to be added back to get your MAGI. A good place to start estimating your income for 2026 is to look at your last year's tax return. Then figure in any raises or bonuses you may get in the future. If you're self employed, you'll want to have a good bookkeeping to help you estimate your income. 

Why It Matters for 2026

If your household income ends up just a little over the 400% FPL limit, and Congress allows the subsidy cliff to return, you might be expected to pay full price for your plan—and repay any help you got throughout the year at tax time. This can easily exceed $10,000 that you would have to pay back at tax time. 

That’s why it’s critical to:

• Review your 2024 and 2025 tax returns

• Estimate 2026 income early

• Talk to a tax advisor, bookkeeper, or your local agent at Utah Avenue Insurance

Self-Employed or Inconsistent Income? Be Extra Careful

If you're self-employed or have a fluctuating income, it can be hard to know exactly what your MAGI will be. A good bookkeeper or tax preparer can help you:

• Track and project income month-to-month

• Decide if you should purchase equipment now or wait until next year for a better tax deduction

• Avoid unintentionally going over the limit by a few hundred dollars

We’re Watching It for You

At Utah Avenue Insurance, we’re keeping a close eye on whether Congress decides to bring back the subsidy cliff. If you want help staying informed and making sure your plan still fits your budget in 2026, we’re here for you.

Better coverage starts here. Let’s make sure you stay protected—no matter what Congress decides.