A change in federal rules for 2026 means even a small increase in income could affect your eligibility for health insurance subsidies.

If you’re among the thousands of workers and business owners in Michigan and Indiana who get health insurance through the Marketplace and receive premium tax credits, strategic year-end planning could help you avoid the health insurance subsidy cliff.

The health insurance subsidy cliff returns in 2026

Eligibility for the Advance Premium Tax Credit (APTC), which helps lower monthly health insurance premiums, is largely determined by income and family size. In general, a household may qualify if their modified adjusted gross income (MAGI) is between 100% and 400% of the  federal poverty level (FPL) for their family size. Households with a MAGI above 400% of the FPL do not qualify for the credit. APTC is commonly referred to as a health insurance subsidy.

When enrolling in health insurance during the fall open enrollment period, Marketplace applicants must estimate their household income for the upcoming coverage year. If their actual MAGI exceeds 400% of the federal poverty level, they generally are no longer eligible for the premium tax credit. Going over the cap by even $1—this is the cliff—means repaying 100% of advance premium tax credits received during 2026. There is no repayment cap under the rules effective for 2025. This differs from the rules in effect from 2021 through 2025, when households earning more than 400% of the FPL could still qualify for subsidies.

If actual household income is lower than projected, the taxpayer may qualify for a larger premium tax credit. Depending on the amount of the advance payments already received, this could result in a larger tax refund or lower tax bill.

Taxpayers reconcile APTC payments with the credit they are actually eligible to receive when filing their federal income tax returns. If they received more in advance credits than they qualify for, they generally must repay the difference. Any amount owed is due by the federal income tax filing deadline the following year.

2026 income limits for health insurance subsidies

The federal poverty level tied to APTC eligibility is adjusted each year by the U.S. Department of Health and Human Services. The following table shows the 2026 income limits for the 48 contiguous states, including Michigan and Indiana:

Household size	100% FPL	400% FPL
1	$15,960	$63,840
2	$21,640	$86,560
3	$27,320	$109,280
4	$33,000	$132,000
5	$38,680	$154,720
6	$44,360	$177,440
7	$50,040	$200,160
8	$55,720	$222,880
Each additional person	Add $5,680	Add $22,720

Different poverty level guidelines apply to Alaska and Hawaii.

Can you avoid the health insurance subsidy cliff?

If your income or household size changes during the year, update your information through the Health Insurance Marketplace as soon as possible. Reporting changes promptly can help adjust your APTC and reduce the likelihood of owing money when you file your taxes.

Some taxpayers whose income is higher than expected may be able to reduce their 2026 MAGI and avoid exceeding the subsidy income limit. According to HealthInsurance.org, potential strategies include contributing to eligible pretax retirement accounts or Health Savings Accounts (HSAs). Eligible taxpayers generally have until the federal income tax filing deadline to make contributions to qualifying traditional IRA and HSA for the previous tax year.

Other adjustments to income, sometimes called above-the-line tax deductions or adjustments, may also reduce MAGI.

This article should not be considered tax or financial advice. Consult a qualified tax professional regarding your individual circumstances.