Key Takeaways
- Premiums for individual health plans in Washington rose an average of more than 22% for 2027.
- A married couple under 65 buying Marketplace coverage gets no Premium Tax Credit for 2027 once household income passes $86,560, which is 400% of the $21,640 federal poverty guideline for two.
- A year-end Roth conversion or capital gain that pushes income past that line means paying back every dollar of the year’s advance credit at tax time.
- The cap stays in place for 2027 unless the Senate passes an extension, and Washington’s open enrollment runs through Jan. 15, 2027.
If you retired before 65 and buy your own health insurance, 2027 is shaping up to be an expensive year. Premiums for individual plans in Washington rose an average of more than 22% for 2027, after the state’s Office of the Insurance Commissioner approved the increase in September.
And it isn’t just Washington. On the Nov. 6 episode of Jill on Money, Jill Schlesinger was asked what people covered by the Affordable Care Act need to know this open enrollment. She said, “It looks like you’re going to see a 15 percent increase in the cost of the Affordable Care Act.”
The Premium Tax Credit softens rises like these for a lot of early retirees. But it comes with a hard income limit, and one December decision can put a household past it.
A $10,000 conversion, and a year of help gone
Let’s take a hypothetical retired couple in Washington, both 62, who buy their coverage through the state’s Marketplace, Washington Healthplanfinder. Say they expect $80,000 of household income in 2027. That’s under the line, so they qualify for the credit and have it paid in advance toward their premiums each month.
Then, in December 2027, they convert $10,000 from a traditional IRA to a Roth. That puts their household income for the year at $90,000, which is $3,440 past the line. With that one move, they lose the credit for all of 2027 and pay Washington’s higher premiums with no help at all.
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The credit stops at 400% of the poverty line
A household can generally get the Premium Tax Credit only if its income is at least 100% and no more than 400% of the federal poverty line for its family size. Congress lifted that 400% cap for tax years 2021 through 2025 only. The House passed a three-year extension on Jan. 8, 2026, but the Senate hasn’t voted on it, so the cap is still there for 2027.
The dollar figure behind the cap comes from the most recent poverty guidelines published as of the first day of open enrollment. For 2027 coverage, those are the guidelines HHS put out in January 2026: $21,640 for a household of two in the contiguous states and D.C. Four times that is $86,560. (For a single early retiree, the line is $63,840, four times the $15,960 guideline for one.)
The whole credit comes back at tax time
The credit paid each month is based on the income the couple estimated when they signed up. The credit they actually get is figured on their tax return, and at $90,000, it’s zero. Even when repayment was capped, the cap covered only households below 400% of the poverty line. So the couple pays back every dollar of 2027’s advance credit when they file, on top of the income tax on the conversion itself.
And for tax years after 2025, there’s no repayment cap below the line either. So a household that stays under $86,560 but underestimated its income still pays back all of the advance credit that turned out too high.
$6,560 of room
The good news is that most of this is in the couple’s hands. At $80,000, they have $6,560 of room under the line for 2027, and a Roth conversion and a capital gain both count against it. So they can size a conversion to fit, or spread a bigger one over the years left until Medicare at 65.
If crossing the line looks likely, they can take less of the credit in advance, or none, and claim whatever they’re owed on their 2027 return, so there’s nothing to pay back. And if their income changes during the year, they can update their estimate on Washington Healthplanfinder so the monthly credit follows it. Open enrollment there runs through Jan. 15, 2027, and a plan picked by Dec. 31 starts on Jan. 1, so now’s the time to get the income estimate right.
The line is set for 2027
That $86,560 won’t move during 2027. HHS’s next guidelines, usually out in January, set the line for 2028 coverage. For a couple anywhere near it, I’d treat $86,560 as a hard ceiling for 2027 and plan every conversion and sale around it. With premiums up more than 22% in Washington, a year of the credit is too valuable to give up for a conversion that can wait a few years.
Of course, the Senate could still take up the House’s extension and lift the cap again. I just wouldn’t plan a 2027 Roth conversion around it.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
