The 400% Cliff Is Back: Three Numbers That Decide Your 2027 Premium

For four years the marketplace had no cliff. The enhanced premium tax credits capped what anyone paid at a percentage of income, however high the income was. Those credits expired on December 31, 2025, and the original rule came back for 2026: above 400% of the federal poverty level, there is no credit at all. Not a smaller one. None.

That rule is the single most expensive thing most self-employed people do not know about their 2027 premium. It is also one of the few in health insurance you can do something about with a pen.

Exhibit A: Where the line is for 2027

The credit for a coverage year is measured against the poverty guidelines in effect when open enrollment starts, so 2027 coverage uses the 2026 guidelines (91 Fed. Reg. 1797, January 15, 2026). For the 48 contiguous states and DC, 400% works out to:

1 person: $63,840

2 people: $86,560

3 people: $109,280

4 people: $132,000

add $22,720 for each additional person. Alaska and Hawaii use higher guidelines.

Below the line, the credit covers whatever a benchmark silver plan costs above a set share of your income. For 2027 that share tops out at 10.22% for households between 300% and 400% of the guideline (Rev. Proc. 2026-26). At the line it stops. A household of two at $86,000 pays about 10.22% of income for the benchmark plan. The same household at $87,000 pays the sticker price, which in many counties is several times that.

As of this writing, Congress has not enacted an extension of the enhanced credits. The House passed one in January 2026 and Senate proposals exist; none is law. Plan around the rule that is in force, and check HealthCare.gov for any change before you enroll.

Exhibit B: The income the IRS actually measures

The credit does not use your gross income or your taxable income. It uses modified adjusted gross income as defined for the credit (Form 8962 instructions): your adjusted gross income, plus tax-exempt interest, plus the untaxed part of any Social Security benefits, plus foreign earned income you excluded. For most people it is simply the AGI line on the 1040, and that is the point. Everything that lowers AGI lowers this number, and the credit is measured against it, not against what you earned.

The second thing to know: the credit is paid in advance on your projected income and settled on your actual income when you file. If you projected $80,000 and ended the year at $88,000, you are over the line, and the repayment of advance credits is not capped for households above 400% of the poverty level. You repay all of it. The levers below matter in December as much as in November.

Exhibit C: The deductions that move it

Each of these is an above-the-line deduction, so each reduces AGI dollar for dollar. Whether any of them fits your situation is a question for your tax preparer; what they do to the credit is not in dispute.

Traditional IRA. A deductible contribution lowers AGI by the amount contributed. You can make it until the filing deadline for the year, which makes it the lever you can still pull after December 31.

Health Savings Account. Contributions are deductible, and since January 1, 2026 every bronze and catastrophic plan sold on an exchange qualifies you to contribute (26 U.S.C. § 223(c)(2), as amended by § 71307 of the 2025 reconciliation law; IRS Notice 2026-5). The 2027 limits are $4,500 self-only and $9,000 family, plus $1,000 at 55 or older.

SEP-IRA or solo 401(k). For the self-employed (a SEP is a simplified employee pension), contributions are deductible and the limits are much higher than an IRA's.

Self-employed health insurance deduction. The premiums themselves are deductible for the self-employed, which lowers AGI, which raises the credit, which lowers the premiums you paid. The IRS addresses this circle in Publication 974 with an iterative worksheet and a simplified alternative. Tax software handles it; a hand calculation needs the publication open.

A worked example, with round numbers and nothing else: a self-employed couple projecting $92,000 is about $5,400 over the 2027 line. A $6,000 deductible IRA contribution, or an HSA contribution plus a modest SEP contribution, puts them under it. Under it, their expected premium for the benchmark plan is capped at 10.22% of income. Over it, there is no cap. The deduction is not the point. The side of the line is.

Exhibit D: What this is not

This is not a reason to earn less. Income above the line is still income, and a credit is not worth more than the dollars it offsets. It is a reason to know where the line is before you decide how much to defer, because for a household within a few thousand dollars of it, the same retirement contribution does two jobs.

It is also not insurance advice. Whether a benchmark silver plan, a bronze plan with an HSA, or a catastrophic plan fits your year is a different question. Catastrophic vs. bronze for 2027 covers the three numbers that decide that one.

Your Move

Before you enroll: add up projected AGI for 2027. Compare it to the household figure above. If you are within reach of the line, decide now which deduction gets you under it, and by how much margin.

During the year: report income changes to the marketplace when they happen. The settlement on Form 8962 is where cliffs become bills.

If the year goes wrong anyway: the premium is one cost. What you pay for care is the other, and it has its own rules: the written estimate you can demand before a visit, the $400 dispute, and the hospital financial assistance floor your state sets. Those apply with a bronze plan, a catastrophic plan, or no plan.

Find your state's rules → — what applies if you end up paying for care yourself, cited to the statute.

Figures are from the 2026 poverty guidelines, Rev. Proc. 2026-26, and Rev. Proc. 2026-24, as published through October 2026. BillFighter is a tool that helps you understand and fight medical bills. It is not a tax preparer or an insurance broker, and this is not legal, tax, or insurance advice.