Personal Finance
How to keep premium tax credits
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The so-called subsidy cliff for Affordable Care Act health insurance premiums is about to return in 2026.
But there are steps households can take to avoid the cliff — and potentially save thousands of dollars on premiums next year, according to financial planners.
The subsidy cliff refers to the strict income threshold households must meet to qualify for premium tax credits. Those tax credits, or subsidies, make monthly insurance premiums more affordable for 22 million Americans who purchase health plans through the ACA marketplace, the vast majority of enrollees.
Before 2021, households with incomes at or below 400% of the federal poverty line were eligible for subsidies. Anyone earning more — even $1 more — was ineligible. Those individuals had to pay the full, unsubsidized ACA insurance premium.
But Congress passed legislation during the Biden administration that made the subsidies more generous and eliminated the subsidy cliff.
But that cliff will come back in January, absent congressional action. Its return could amount to a huge financial shock for households that lose premium tax credits as a result, financial advisors said.
“It’s one of those phantom taxes that has a tremendous impact,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo, which was No. 69 on CNBC’s Financial Advisor 100 list for 2025.
About 1.5 million people — roughly 7% of all ACA enrollees — had incomes over 400% of the poverty line in 2024, according to the Centers for Medicare and Medicaid Services.
Households at risk of losing the subsidies should “do everything to stay as far away from that cliff as possible,” Lucas said. “You don’t want to put your toes up to that cliff and play with it.”
It’s not a foregone conclusion that the cliff will return.
Extending the enhanced subsidies was a key demand for Democrats during the government shutdown.
A group a Senate Democrats broke from their party to help Republicans pass legislation to end the shutdown, without an extension to the enhanced ACA subsidies. However, Republican leaders assured that the Senate would vote on a health care bill drafted by Democrats before the second week of December.
Many observers view its success as a long shot.
“It looks pretty much like a done deal that those subsidies will go away,” Lucas said. “[It’s a] plan-for-the-worst and hope-for-the-best scenario.”
The financial impact of the ACA subsidy cliff
The healthcare.gov website on a laptop arranged in Norfolk, Virginia, US, on Saturday, Nov. 1, 2025.
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The income threshold for the subsidy cliff varies by household size.
For example, a one-person household would lose ACA subsidies in 2026 if the individual’s income exceeds $62,600. The threshold is $128,600 for a household of four.
The financial impact of the cliff will vary based on age, geography and income, according to a recent analysis by Shameek Rakshit, a research associate at KFF, a nonpartisan health policy research group.
Households just over the threshold — especially older adults, who typically have higher premiums — will generally be the hardest-hit, Rakshit wrote.
For example, a 60-year-old earning $64,000 (409% of the federal poverty line) would pay about $14,900 in annual premiums without a tax credit in 2026, according to Rakshit. Meanwhile, someone of the same age living in the same city, making $62,000 (396% of the poverty line), would receive a tax credit and pay approximately $6,200.
Senate Minority Leader Chuck Schumer (D-NY) speaks at a press conference with other members of Senate Democratic leadership following a policy luncheon at the U.S. Capitol in Washington, DC on October 15, 2025.
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The individual making $62,000 would have a premium capped at 10% of annual income, while the one earning $64,000 would pay the full, uncapped price, likely about a quarter of that person’s income, he wrote.
“Managing income becomes incredibly important,” said Jeffrey Levine, a certified public accountant and certified financial planner based in St. Louis. “The worst thing you could be is $1 over the cliff.”
“If you’re on that border … basically [do] anything to get back under,” said Levine, the chief planning officer at Focus Partners Wealth.
4 ways to lower income to qualify for ACA subsidies
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There are a few financial steps households on the edge of the cliff can take — this year and next — to reduce their income and qualify for subsidies, according to financial advisors.
“A lot of these [strategies] are for people on the fringe,” Lucas said. “If you’re blowing it by $50,000, there’s probably nothing we can do.”
The first thing to know: The key number is the household’s annual “modified adjusted gross income” for 2026.
Enrollees will estimate their MAGI for 2026 when they sign up for health insurance on the ACA marketplace during open enrollment, and will receive premium subsidies based on that estimated income. Households that underestimate their income would need to repay excess subsidies to the federal government.
Financial advisors say there are four ways households can potentially reduce their MAGI and qualify for lower premiums.
1. Roth IRA conversions and withdrawals
A Roth individual retirement account is a type of after-tax account — accounts are funded by after-tax contributions but the balance grows tax-free.
Withdrawals are also tax-free for many people. Importantly, that means withdrawals from a Roth IRA generally don’t count toward adjusted gross income, Lucas said.
Those on the edge of the ACA subsidy cliff might therefore withdraw Roth account money for income in 2026 without raising their annual income and losing their premium tax credits, financial advisors said.
However, Roth IRAs come with rules that could trigger tax penalties for the unwary.
For example, investors must be age 59½ or older to withdraw account earnings free of taxes and penalties. They must also have owned the Roth account for at least five years.
Breaching these rules would mean a withdrawal’s earnings count toward one’s adjusted gross income, and investors would additionally owe a 10% penalty.
By comparison, investors can withdraw any contributions to Roth accounts at any time without penalty.
Those who don’t have ample Roth savings can consider converting pre-tax money currently held in a 401(k)-type plan or IRA to Roth funds, Lucas said.
They would need to do so by the end of 2025, he said. That way, they’d have a larger pool of Roth funds available to them next year, he said.
Investors would owe income tax on the conversion, but it may be worthwhile if they can save thousands of dollars on health premiums next year, Lucas said.
2. Contribute to an IRA, HSA or other tax-advantaged account
Households can also consider contributing to a pre-tax account like an IRA or health savings account in 2026, Lucas said.
Investors generally get an upfront tax break for saving in these accounts, thereby reducing their adjusted gross income.
But again, there are caveats.
For example, the ability to write off IRA contributions depends on factors like income and your workplace retirement plan.
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Further, HSAs are only available to households enrolled in a high-deductible health plan. They’d need to pick that health insurance plan by Dec. 15 for coverage to start at the beginning of 2026.
However, more households likely have health savings accounts available to them through the ACA marketplace due to the “big beautiful bill” passed in July. That law makes anyone covered under a bronze or catastrophic plan — two tiers of plans available on the ACA marketplace — eligible for an HSA.
However, a plan with a high deductible might not make financial sense for a household planning for many costly medical procedures next year, Lucas said.
3. Sell investments at a loss
Investors who own stocks or other investments like bonds in a taxable brokerage account might consider selling those assets for income in 2026 — but generally only if the assets haven’t generated a big profit, or even if they’re in the red, Lucas said.
That’s because only the capital gain — i.e., profit — is counted as part of one’s adjusted gross income. A stock or other asset with a small net gain wouldn’t be expected to significantly raise one’s AGI.
The healthcare.gov website on a laptop arranged in Norfolk, Virginia, US, on Saturday, Nov. 1, 2025.
Stefani Reynolds | Bloomberg | Getty Images
Further, an investment with a net loss could even help lower an investor’s AGI, Lucas said.
If capital losses exceed capital gains, investors can generally lower their income dollar-for-dollar up to $3,000.
Here’s a simple example: If an investor bought a stock for $9,000 and sold it for $10,000, they would only include the $1,000 gain in their AGI. If they sold the stock for $8,000, it would reduce income by $1,000 without other investing losses, all else equal.
4. Work less
Hourly workers or others who have flexible incomes might simply choose to work less in 2026 to ensure their income is low enough to qualify for a premium tax credit, advisors said.
“If someone is going to end up being $5,000 over the cliff, they should literally just stop working,” said Levine of Focus Partners Wealth.
The Federal Reserve held interest rates steady at the conclusion of its policy meeting on Wednesday.
In what could be Jerome Powell’s last as chair before President Donald Trump’s yet-to-be-confirmed nominee Kevin Warsh takes the helm, central bankers maintained the federal funds rate in a target range of 3.5% to 3.75%.
Inflation has surged since the war with Iran began, leaving policymakers with limited room to act, according to Sean Snaith, the director of the University of Central Florida’s Institute for Economic Forecasting. “We’re in a kind of suspended animation — between Iran and the Fed transition,” Snaith said.
Before the oil shock, inflation was holding above the Fed’s 2% target but not worsening. Now the jump in energy costs could have longer-term inflationary effects, economists say.
For Americans struggling in the face of higher gas prices and overall affordability challenges, the central bank’s decision to keep interest rates unchanged does little to ease budgetary pressures. “The cavalry isn’t coming anytime soon,” Snaith said.
How the Fed decision impacts you
The Fed’s benchmark sets what banks charge each other for overnight lending, but also has a trickle-down effect on many consumer borrowing and savings rates.
Short-term rates are more closely pegged to the prime rate, which is typically 3 percentage points above the federal funds rate. Longer-term rates, such as home loans, are more influenced by inflation and other economic factors.
Credit cards
Most credit cards have a short-term rate, so they track the Fed’s benchmark.
After the Fed cut rates three times in the second half of 2025, the average annual percentage rate has stayed just under 20%, according to Bankrate.
“Without Fed rate cuts, there’s not much reason to expect meaningful declines anytime soon, so carrying a balance will remain very expensive,” said Matt Schulz, chief credit analyst at LendingTree.
Mortgage rates
Fixed mortgage rates, on the other hand, don’t directly track the Fed but typically follow the lead of long-term Treasury rates.
Concerns about how the Iran war will impact the U.S. economy have already pushed the average rate for a 30-year, fixed-rate mortgage up to 6.38% as of Tuesday, from 5.99% at the end of February, according to Mortgage News Daily.
That leaves homeowners with existing low mortgage rates “feeling stuck,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “Mortgages, more than any other credit type, work on a churn,” she said, referring to how a dip in rates can boost borrowing activity.
Student loans
Federal student loan rates are also fixed and based in part on the 10-year Treasury note, so most borrowers are somewhat shielded from Fed moves and recent economic uncertainty.
Current interest rates on undergraduate federal student loans made through June 30 are 6.39%, according to the U.S. Department of Education. Interest rates for the upcoming school year will be based in part on the May auction of the 10-year note.
Car loans
Auto loan rates are tied to several factors, including the Fed’s benchmark. Because financing costs remain elevated, new car buyers are taking on longer loans to keep their monthly payments manageable, according to the latest data from Edmunds.
Even so, with the rate on a five-year new car loan near 7%, the average monthly payment on a new car rose to $773 in the first quarter of 2026, an all-time high.
“Car buyers are in a tough spot right now because they’re getting squeezed from both ends: high sticker prices and high interest rates, with neither showing any signs of letting up,” said Joseph Yoon, consumer insights analyst at Edmunds.
“Until the rate picture shifts, buyers will keep stretching loan terms to make payments work, which only adds to the total cost of ownership down the road,” Yoon said.
Savings rates
While the Fed has no direct influence on deposit rates, the yields tend to be correlated with changes in the target federal funds rate. So, although rates on certificates of deposit and high-yield savings accounts have fallen from recent highs, they are holding above the annual rate of inflation.
For now, top-yielding online savings accounts and one-year CD rates pay around 4%, according to Bankrate.
“Yields on high-yield savings accounts and certificates of deposit are down from their peaks of a few years ago, but they’re still strong compared to what we’ve seen for most of the past decade,” Schulz said.
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The average tax refund is 11.2% higher this season, compared with about the same period in 2025, according to the latest IRS filing data.
As of April 10, the average refund amount for individual filers was $3,397, up from $3,055 about one year ago, the IRS reported on Friday.
The IRS data reflects about 114 million individual returns received, out of about 164 million expected through Tax Day. Next week’s filing update is expected to include data through the April 15 deadline.
President Donald Trump‘s 2025 legislation, rebranded to the “working families tax cuts,” was a key talking point for Republicans on Tax Day.
With the November midterm elections approaching and Republicans defending slim majorities in Congress, many GOP lawmakers have highlighted Trump’s tax breaks and higher average refunds.
Meanwhile, affordability has been top of mind for many Americans amid rising costs of gas, electricity, food and other living expenses.
For filers who expected a refund this season, nearly one-quarter, or 23%, planned to use the funds to pay down credit card debt, and the same share said they would save the payment, according to the CNBC and SurveyMonkey Quarterly Money Survey, released in April. It polled 3,494 U.S. adults at the end of March.
Who benefited from Trump’s ‘big beautiful bill’
“It’s been a great tax season for the American people,” many of whom have benefited from Trump’s tax breaks, Treasury Secretary Scott Bessent said during a White House press briefing on Wednesday.
More than 53 million filers claimed at least one of Trump’s “signature new tax cuts” — the deductions for tip income, overtime earnings, seniors and auto loan interest — the Department of the Treasury also announced on Wednesday.
Those filers, who claimed the deductions on Schedule 1-A, have seen an average tax cut of over $800, according to the Treasury. Tax cuts can trigger a higher refund or reduce taxes owed, depending on the filer’s situation.
Some filers who itemize tax breaks have also seen benefits from the bigger federal deduction limit for state and local taxes, known as SALT. Trump’s legislation raised that cap to $40,000, up from $10,000, for 2025.
The latest SALT deduction limit change is expected to primarily benefit higher earners, according to a May 2025 analysis of various proposals from the Tax Foundation.
The Treasury has not released data on how many filers have claimed the SALT deduction during the 2026 filing season.
Traders work at the New York Stock Exchange on April 16, 2026.
NYSE
U.S. stocks climbed to record highs on Thursday against a backdrop of war, an oil supply shock and economic forecasts warning of stunted growth amid a protracted conflict.
Many investors may be thinking: Why?
Largely, it’s because the stock market is a barometer of what investors think will happen in the future, rather than an assessment of the present day, according to economists and market analysts.
Investors are essentially shrugging off the Middle East conflict as a blip that will be resolved relatively quickly, they said.
“The stock market isn’t trying to price what’s happening today,” said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank. “The stock market is always trying to price what the world is going to look like six to 12 months from now.”
Why stocks have been ‘resilient’
The S&P 500, a U.S. stock index, fell about 8% in the initial weeks of the Iran war, from the start of the conflict on Feb. 28 to a recent low on March 30.
But stocks have rebounded since then, erasing all losses since the beginning of the war. The S&P 500 closed at an all-time high on Thursday — about 11% higher than its nadir at the end of March. That followed a record close on Wednesday.
“The market has remained very resilient in the face of the war and has rallied strongly on the prospect that it will be resolved,” said Mark Zandi, chief economist at Moody’s.
A ship waits to pass through the Strait of Hormuz following the two-week temporary ceasefire between the US and Iran, which is conditional on the opening of the strait, in Oman on April 8, 2026.
Shady Alassar | Anadolu | Getty Images
And while investors cheered the possibility of a diplomatic off-ramp to the conflict, the temporary ceasefire has appeared tenuous, with the U.S. and Iran each accusing the other of breaking the agreement.
Nations haven’t been able to reach a peace deal ahead of the ceasefire’s end. Vice President JD Vance said U.S. officials left peace talks in Pakistan over the weekend after the Iranian delegation refused to agree to American demands not to develop a nuclear weapon.
The markets ‘have memory’
Ultimately, the stock market is signaling a collective belief that tensions will ratchet down, the war will end in the near term and oil flows through the Strait of Hormuz will normalize, economists said.
That’s largely because investors have been conditioned to believe that President Donald Trump will back off if the economic pain becomes too intense, economists said — the so-called “TACO” trade, shorthand for “Trump always chickens out.”
“Investors strongly believe — and have been conditioned to believe — he’s going to stand down, find a way to pivot, declare victory and move on,” Zandi said.
Trump has pushed back on the notion of backing down, framing his brinkmanship as a savvy negotiating tactic.
Economists pointed to a recent example of this dynamic: in April 2025 during so-called liberation day, when the Trump administration levied a host of tariffs on U.S. trading partners.
Within days — after the stock market had cratered more than 12% — Trump announced a 90-day pause on those tariffs. Stocks then saw one of their biggest daily rallies in history following Trump’s reversal.
Investors remember that Trump often de-escalates geopolitical shocks — which is why they’ve seized on positive headlines that hint at progress in peace talks, for example, Seydl said.
“The markets have memory,” Seydl said.
AI stocks and the ‘tech boom’
Traders celebrating at the New York Stock Exchange on April 15, 2026, as the S&P 500 closed above the 7,000 level for the first time.
NYSE
There are other factors underpinning market resilience during wartime, economists said.
One is the investors’ enthusiasm for artificial intelligence and technology stocks, which account for almost half of the S&P 500’s market capitalization, Zandi said.
“Those stocks run on their own dynamic independent of anything, including the war in Iran,” Zandi said. “I think we would have been down a lot more and it would have been harder for us to recover had it not been for the very, very optimistic perspectives on AI.”
We’re in the middle of a “tech boom” — and investors are likely to remain optimistic until they think the tech cycle has run its course, Seydl said.
More broadly, stock investors are essentially making a bet on the future earnings growth of a company — and the earnings backdrop has been “pretty solid,” Seydl said.
Consumer spending appears to be stable, for example, economists said. And companies are getting a boost to their after-tax earnings from the GOP’s so-called “big beautiful bill,” which, among other things, made it easier to write off investments upfront and therefore reduce their tax liability, Zandi said.
Going forward
Experts said there will be an economic hit from the Iran war, though.
“Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated,” Pierre-Olivier Gourinchas, director of research at the International Monetary Fund, wrote Tuesday.
A protracted conflict risks deep and global economic pain, he wrote.
Even if the conflict is short-lived — as the broad market expects — stocks are unlikely to march much higher until it’s clear the U.S. is on the other side of the war and its economic fallout, Zandi said.
If investors are incorrect, and President Trump doesn’t back down or quickly extricate the U.S. from the war, the stock market may see a “full-blown correction” or worse, Zandi said. A stock market correction is a decline of at least 10% from recent highs.
“Everyone thinks they know what the script is,” Zandi said. “Now they just need to follow the script. If they don’t, the market will have some real problems.”
The uncertainty provides yet another example of why the average investor with a long time horizon should stick to their investment plan and ignore the noise, experts said.
“Trying to time the market is very difficult if not impossible for the average investor,” Seydl said. “It’s better to take a long-term perspective and ride out bouts of volatility.”
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