How do premium tax credits change for high earners under current law (2025)?
Executive summary
Enhanced premium tax credits that expanded eligibility above 400% of the federal poverty level (FPL) and capped required household contributions at lower rates are scheduled to expire after 2025; if they lapse, the 400% FPL cap returns and required contribution percentages will rise—raising marketplace premiums sharply for many higher‑earning enrollees [1] [2] [3]. Independent estimates project average marketplace premium payments would more than double without the enhanced credits (114% increase; $888 in 2025 to $1,904 in 2026 in KFF’s model) and specific examples show people just above 400% FPL could face five‑figure annual premiums in 2026 [4] [5].
1. What’s changing for high earners: the end of the temporary expansion
Congress temporarily removed the 400% FPL upper limit and tightened the income‑based contribution schedule through laws passed in 2021–2022; those enhancements are set to end after 2025, which will reinstate the old statutory cap (400% FPL) and restore higher “applicable percentages” used to calculate required household premium contributions in 2026 [2] [1]. The PTC itself does not disappear—only the temporary expansion and more generous subsidy schedule expire [1].
2. How the math shifts: higher required contributions and lower subsidies
Under the enhanced rules, required contribution caps were lower (for instance an 8.5% cap applied at higher incomes), which produced larger credits for those above 400% FPL; when enhancements expire, the formula will revert and the percentage of income a household must pay will increase at each FPL level, which lowers the tax credit amount [1] [2]. The Congressional Research Service explains the credit formula ties the credit to “applicable percentages” of income and those percentages will be higher in 2026 than in 2025, producing smaller credits or none at all for some higher‑income households [1].
3. Practical impact: cliff effects and big premium jumps near 400% FPL
Multiple analyses show a sharp “cliff” for people near the 400% threshold: someone slightly above the cutoff may lose large subsidies and face premiums many times higher than a peer just below the line. CNBC cites an example of a 60‑year‑old at 409% FPL facing roughly $14,900 in annual premiums in 2026 versus about $6,200 for a peer at 396% FPL—illustrating the practical shock if the expanded rules lapse [5]. KFF’s modeling finds that average out‑of‑pocket marketplace premium payments would rise 114% if enhanced credits expire (from $888 in 2025 to $1,904 in 2026 under their assumptions) [4] [3].
4. Who gains now — and who loses if enhancements end
The temporary enhancements increased affordability not only for low‑income enrollees but also extended help to households over 400% FPL; policy briefs and enrollment data show large growth in marketplace coverage that included higher‑income enrollees during the enhanced period [6] [7]. Analysts warn expiration will especially affect older adults with incomes just above 400% FPL, rural residents, and states that did not expand Medicaid—populations where the subsidy loss translates into large premium increases and potential uninsurance [7] [8].
5. Policy alternatives and political context
Congress faces three basic choices: let the enhancements expire and restore pre‑2021 rules, extend/make permanent the enhanced schedule, or adopt a middle path (narrower extensions or adjusted contribution caps). Stakeholders disagree: proponents of permanence point to coverage gains and lower uncompensated care; critics highlight fiscal costs and debates over eligibility integrity. The CRS notes the statutory PTC remains but the temporary enhancement expires unless Congress acts [1] [6].
6. Limitations in the public record and open questions
Available sources document the statutory mechanics, projections, and illustrative cases, but they do not provide definitive individual premium amounts across every market or predict congressional action timing; they rely on modeling assumptions (premiums, local markets, IRS percentages) that affect outcomes [3] [4]. Sources do not state whether Congress will act before coverage year 2026—“available sources do not mention” final legislative outcomes beyond the statutory expiration [1].
7. What people should watch and do now
Watch for: (a) IRS guidance on 2026 applicable percentages; (b) congressional legislation before open enrollment for 2026; and (c) updated KFF/CBPP/CRS modeling. For individuals near the 400% FPL mark, experts recommend estimating 2026 income scenarios now since a small income change can trigger large premium differences; the IRS and marketplace rulebooks explain reconciliation and repayment rules that apply if advance credits were taken [2] [9].
Sources cited above: Congressional Research Service, IRS, KFF, CNBC, CBPP, CRS briefs, Ballotpedia and related analyses as noted inline [1] [2] [3] [5] [10] [6].