TaxtirementRetirement tax questions · 2026 figures
Before Medicare, how do we keep Marketplace help?
Retiring before 65 usually means buying health insurance on healthcare.gov or your state's Marketplace. The premium tax credit can pay much of the cost, but it depends on your income for the year, and in 2026 it stops completely above a line. For early retirees who control their income through withdrawals and conversions, that line shapes the whole plan until Medicare starts.
In short
- For 2026 coverage, income above 400% of the federal poverty line gets no premium tax credit at all: $84,600 for a couple and $62,600 for one person in the 48 contiguous states.
- One dollar over the line can cost the whole credit, often thousands of dollars.
- IRA withdrawals, Roth conversions, capital gains, tax-free bond interest and the untaxed part of Social Security all count toward the income.
- Below the line, the credit limits what you pay for the benchmark plan to a share of income, from 2.1% up to 9.96%.
Why it's hard
The credit is figured on the whole year's income, but you sign up, and estimate that income, before the year starts. If income comes in higher, you repay the extra credit when you file. Early retirees often have a lot of control over their income, and a lot of reasons to raise it: Roth conversions in low-income years, selling investments, or drawing down IRAs. Each of those dollars counts toward the cliff.
The rules also changed for 2026. The larger credits of 2021 through 2025, with no cliff, expired at the end of 2025, so plans made under the old rules can cost more than expected.
What matters
- Household size. The line is a multiple of the poverty guideline for your household: $15,650 for one person and $21,150 for two (the 2025 guidelines, which apply to 2026 coverage).
- Which income counts. Adjusted gross income plus tax-free interest and the part of Social Security that isn't taxed. Money from Roth accounts, savings and the cost basis of investments you sell doesn't count; that's what makes the cliff manageable.
- Your local benchmark premium. The credit is the benchmark silver plan's cost minus your required share, so the higher the premiums where you live, the more the cliff costs.
- The floor. Below 100% of the poverty line there's generally no credit either (Medicaid rules vary by state).
- Medicare's look-back. Medicare surcharges use income from two years earlier, so income at 63 already affects premiums at 65. See Medicare surcharges.
An example with 2026 figures
A couple, both 62, retired, buying a Marketplace plan for 2026. The benchmark silver plan where they live costs $24,000 a year for the two of them.
| Income $84,000 | Income $85,000 | |
|---|---|---|
| Share of the poverty line | 397% | over 400% |
| Their required share of income | 9.96% ($8,366) | the full premium |
| Premium tax credit for the year | $15,634 | none |
The extra income on the right costs them the whole $15,634 credit. At $84,000 they had $600 of room left below the $84,600 line; a Roth conversion or IRA withdrawal that used more than that would cost far more than the income tax on it.
What Taxtirement shows
- Room until the subsidy cliff this year, on the This Year screen and the home-screen widget, alongside the room in your bracket and before the next Medicare tier.
- The premium tax credit in each year before Medicare, from your benchmark premium and the plan you'd buy.
- Roth conversion scenarios that stay under the ACA cliff until 65, next to scenarios that don't. Premiums after the credit are paid from the plan, so a lost credit shows up in the results.
- Your true rate on the next dollar, which near the cliff can be far above your bracket.
See the federal rules page for the full table of required shares by income.
References
The rules and figures on this page come from these official sources; the household in the example is made up. The app's calculations are also checked against them; see How we check our numbers.
Laws
- 26 U.S.C. § 36B: Premium tax credit (uscode.house.gov)Used for: the premium tax credit, the income it uses and the 400% of poverty limit
Regulations and official guidance
- IRS Revenue Procedure 2025-25: 2026 premium tax credit percentages (irs.gov)Used for: the 2026 shares of income expected toward the benchmark plan
Forms, instructions and publications
- Instructions for Form 8962 (2025): Premium Tax Credit (irs.gov)Used for: how the credit is figured, the income that counts and repaying extra credit
Agency data
- Annual Update of the HHS Poverty Guidelines (2025) (federalregister.gov)Used for: the 2025 poverty guidelines used for 2026 coverage
See it with your own numbers. Taxtirement works out every year of retirement for your household, federal and state, and puts the scenarios side by side so you can compare them. Coming November 2026 for iPhone, iPad and Mac.
More retirement tax questions
- Should we convert to a Roth, and how much?
- When should each of us start Social Security?
- Will Medicare surcharges (IRMAA) hit us?
- What happens to our taxes when one of us dies?
- Should we give to charity from the IRA (QCDs)?
This page explains the 2026 rules as Taxtirement applies them, for education and planning. The example is a simplified household (federal income tax only, unless it says otherwise); your own figures will differ. It isn't investment, tax or legal advice. Rules change; check the official instructions, or a tax professional, before acting. Spotted something wrong? Tell us.