How Much Can I Convert to Roth Without Losing My ACA Subsidy? The 2026 Subsidy Cliff Is Back

You retired at 57. You are living off a brokerage account and some cash, your taxable income is low on purpose, and that low income is buying you a heavily subsidized Silver plan on the marketplace until Medicare kicks in at 65. Now you want to use these low-income “gap years” to convert some of your traditional IRA to Roth while you are sitting in the 10% or 12% bracket.

Smart instinct. But here is the question that actually decides the size of your conversion: how much can you convert before the conversion income wipes out your health insurance subsidy? In 2026 that question has teeth it did not have last year, because the Roth conversion ACA subsidy cliff is back. The number you can convert is no longer “a lot” — it is a hard ceiling, and going one dollar over it can cost you every dollar of your premium tax credit.

How much can I convert in 2026 without losing my ACA subsidy?

The short answer: you can convert up to the dollar that keeps your household income under 400% of the federal poverty line — and not a dollar more.

A Roth conversion is ordinary income. Every dollar you convert lands in the same income figure the marketplace uses to size your subsidy. So the amount you can safely convert is a subtraction problem with three numbers:

• Your “floor” — all your other income for the year, plus the add-backs the ACA requires (more on those below).
• Your “ceiling” — 400% of the federal poverty line for your household size.
• The gap between them — that is your conversion room.

If your floor is $30,000 and your 400% ceiling is $62,000, you have roughly $32,000 of conversion room. Convert $32,000 and you keep the subsidy. Convert $40,000 and, in 2026, you do not lose a slice of the subsidy — you lose the whole thing.

That last part is the change everyone is about to get wrong.

Wait — didn’t the subsidy cliff go away?

It did, temporarily, and now it is coming back.

From 2021 through 2025, a pandemic-era rule capped your premium contribution at 8.5% of income and let people above 400% of poverty still qualify for help. That was a glide path, not a cliff: earn a little more, lose a little subsidy. Those enhanced percentages were written into the law as temporary, applying only to tax years “beginning after December 31, 2020, and before January 1, 2026” (IRC § 36B(b)(3)(A)(iii)).

For 2026, that window closes. The applicable percentages revert to the older, less generous indexed schedule, and — the part that matters here — the 400% of poverty eligibility limit returns. Above that line you are simply not an “applicable taxpayer” under § 36B(c)(1)(A), which means you get zero premium tax credit. Not reduced. Zero.

That is why this is a cliff and not a slope. At 399% of poverty you might be getting many thousands of dollars in subsidy. At 401% you get nothing, and you owe back what you already received. One conversion can be the difference.

I will add the obvious caveat: Congress has extended these enhanced subsidies before, and there is ongoing political pressure to do it again. But you cannot plan a December conversion on a bill that has not passed. As the law sits right now, the cliff is back for 2026, and that is what you have to plan against.

What income does the ACA actually count?

It counts more than your tax return’s bottom line, and this is where careful people still trip.

The marketplace uses a modified adjusted gross income (MAGI) figure. It starts with your AGI and then adds back three things that are easy to forget because they are not taxable:

• Tax-exempt interest — your municipal bond interest counts here even though it is federally tax-free.
• The untaxed portion of Social Security benefits — relevant if you have already started benefits.
• Excluded foreign earned income.

Your Roth conversion is fully in AGI, so it is fully counted. The trap is the add-backs: a retiree who built a tidy municipal bond ladder for “tax-free” income can be sitting $5,000 closer to the cliff than their 1040 suggests, before they convert a single dollar. Count the add-backs in your floor, or you will aim at the wrong ceiling.

How do I find my number?

Work it in this order, every year, because the poverty guidelines and your own income both move.

• Add up your expected non-conversion income for the year: interest, dividends, capital gains (including the ones you do not control — see below), any pension or part-time income, and the taxable part of Social Security.
• Add the ACA add-backs: tax-exempt interest and untaxed Social Security. That total is your floor.
• Find 400% of the federal poverty line for your household size and state, using the prior year’s guidelines that your 2026 plan is priced on. For a single person this lands in roughly the low-$60,000s; for a couple, the low-$80,000s — pull the current table for your exact figure, because the cliff is exact.
• Subtract your floor from that ceiling. What is left is the most you can convert this year and keep the subsidy.

There is also a floor you should not fall through. To qualify for a premium tax credit at all you generally need household income of at least 100% of the poverty line (§ 36B(c)(1)(A)). For some early retirees with very little taxable income, a Roth conversion is actually the tool that lifts income up to that floor so they qualify in the first place. The target is a window, not just a ceiling.

Use the calculator below to find your own number, then read the warning that follows it — because in 2026 a near miss costs more than it used to.

The repayment cap is gone in 2026 — why a small miss now costs everything

Here is the new landmine, and it is the reason precision matters more in 2026 than it ever has.

In past years, if you guessed your income low when you signed up and then went over, there was a safety net: the amount of subsidy the IRS could claw back was capped on a sliding scale as long as you stayed under 400% of poverty. A married couple’s worst case below that line was a few thousand dollars, not the whole subsidy.

That cap is gone. The 2025 law (P.L. 119-21, § 71305) struck IRC § 36B(f)(2)(B), the repayment limitation, effective for tax years beginning after December 31, 2025. For 2026, if the advance subsidy you received turns out to be more than you were entitled to, you repay the full difference on Form 8962 — with no cap, at any income level.

Put the two changes together and you see the real risk. A retiree perfectly converts up to 350% of poverty in November. Then in December a mutual fund in their taxable account throws off a $15,000 capital gain distribution they did not choose and did not see coming. That pushes them over 400%. Old rules: lose some subsidy, capped repayment. New 2026 rules: lose the entire premium tax credit for the year and repay every dollar of it, in full.

The defense is timing. Do not finalize conversions until December, after your funds have declared their capital gain distributions and you can see your actual income. Convert into the room that is genuinely left, not the room you projected in January.

Should I convert right up to the line?

Not always — and this is where the “how much can I convert” question quietly becomes “how much should I.”

Filling every dollar up to 400% of poverty maximizes this year’s conversion, but it ignores two other costs:

• Cost-sharing reductions. On Silver plans, staying under 250% of poverty unlocks lower deductibles and out-of-pocket maximums. Those have their own hard income limits. Converting up to the subsidy ceiling can quietly cost you the better plan design if you actually need to use your insurance.
• The later-life bill. The whole point of converting now is to shrink the traditional IRA before required minimum distributions and Medicare premiums hit. Convert too little to protect the subsidy every year and you can walk straight into oversized RMDs and higher Medicare (IRMAA) surcharges in your 70s.

If your traditional balance is large, the subsidy you are protecting may be worth less than the bracket and IRMAA damage you are storing up. If it is modest, the subsidy usually wins. This is a multi-year sequencing decision, and it deserves a model, not a gut call. It is the same trade-off we walk through when deciding whether a conversion makes sense at all in our post on Roth vs. Traditional IRA.

Next steps

The mechanics here are simple to state and brutal to get wrong: convert into the gap between your income floor and the 400% poverty ceiling, count the MAGI add-backs, finalize in December, and respect that in 2026 there is no repayment cap to catch you if you miss.

If you want someone to build the actual numbers — your floor, your ceiling, your conversion room, and whether converting up to the line even makes sense given your RMD and IRMAA picture down the road — book a meeting with our office here. It is a lot cheaper to model the conversion than to unwind a lost subsidy.

Disclaimer: This article is for educational purposes only and does not constitute investment, tax, or financial advice. Tax law is highly fact-specific and subject to change, and the ACA premium tax credit rules in particular are the subject of active legislation. Always consult a qualified professional about your specific situation.