Which income sources are newly included or excluded under the 2026 MAGI rules for ACA subsidies?
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Executive summary
Starting in the 2026 plan year, ACA subsidy eligibility reverts toward pre‑2021 rules: the 400% of federal poverty level (FPL) income cap returns for premium tax credits unless Congress extends the enhancements, and the “cost‑of‑coverage” test that allowed higher incomes to qualify through 2021–2025 disappears [1] [2]. At the same time, technical changes — most notably that HSA and other above‑the‑line deductions reduce ACA‑specific MAGI and that Bronze and catastrophic Marketplace plans will be HSA‑eligible — create new, lawful ways to lower MAGI and affect eligibility [3] [4].
1. The headline change: the subsidy cliff is back
The temporary expansion of premium tax credits that opened subsidies above 400% FPL through 2025 is scheduled to expire at the end of 2025; under current law, people with household MAGI above 400% of FPL will be ineligible for premium tax credits in 2026 unless Congress acts to extend the enhanced rules [1] [5]. Analysts warn this will sharply raise premiums for many unless lawmakers intervene [6] [5].
2. What counts as “ACA‑specific MAGI” — and what’s newly important
Marketplace subsidy eligibility uses an ACA‑specific MAGI calculation; deductions that reduce adjusted gross income (AGI) — such as HSA and certain pre‑tax retirement contributions — reduce ACA‑MAGI and therefore can change subsidy eligibility [7] [4]. Sources emphasize HSA contributions in particular because starting with 2026 more Marketplace plans will be HSA‑eligible, expanding access to that above‑the‑line reduction [3] [4].
3. New inclusions and exclusions in plain terms — what you can and cannot count on
Available reporting shows that the basic list of income types counted for ACA MAGI remains the same in principle (wages, self‑employment income, Social Security where applicable, rental income, etc.), but two operational shifts matter: the return of the 400% FPL cutoff for subsidy eligibility unless Congress acts, meaning the “cost as percent of income” safety net used in 2021–2025 won’t protect higher earners in 2026 under current law [2] [1]; and HSA and other above‑the‑line contributions will now be a more prominent, legitimate tool to lower MAGI because more Marketplace plans qualify for HSAs [3] [4]. Sources do not enumerate a new list of specific income sources being added or removed from the MAGI definition itself — they explain how existing deductions and eligibility tests change (not found in current reporting).
4. How the “benchmark cost” test changed and what’s ending
From 2021 through 2025, enhanced rules allowed people above 400% FPL to receive subsidies if the benchmark (second‑lowest‑cost Silver) plan would cost more than 8.5% of ACA‑MAGI; that backstop is slated to lapse for 2026, reverting eligibility to the traditional FPL cap unless new legislation extends the provision [2] [1]. Healthinsurance.org explains the benchmark affordability test that replaced the strict income cap during the enhancement period and warns its return to old rules will matter to many households [2].
5. Practical moves consumers are being advised to consider
Coverage advisors and analysts point to legitimate, legal steps consumers can take to move their ACA MAGI, such as maximizing above‑the‑line deductions (HSA, IRA, self‑employed health insurance) before filing 2026 returns, and taking advantage of the new HSA eligibility for Bronze/catastrophic Marketplace plans to reduce MAGI [4] [3]. Several sources underline the reconciliation risk: advance subsidies are reconciled on tax returns and excess APTC must be repaid — with no statutory repayment cap for 2026 reported in the sources [7].
6. Competing perspectives and implicit agendas in coverage
Policy researchers (KFF) and consumer sites focus on the financial harm of the lapse, citing large average premium increases if enhanced credits expire [6] [5]. Marketplace‑oriented outlets and brokers stress tactical steps taxpayers can take to remain eligible [4] [3]. Implicit agendas vary: advocacy and analytic groups emphasize system‑level costs and uninsured risk [6] [5], while insurance‑market writers promote planning strategies and product changes that may benefit their audiences [4] [3].
7. What reporting does not say — limits and unanswered questions
Current sources explain that deductions such as HSA and pre‑tax retirement contributions reduce ACA‑MAGI and that HSA access expands for 2026, but they do not provide a definitive new list of income categories that are newly included or excluded from ACA‑MAGI itself; rather they describe eligibility rule changes and how deductions interact with MAGI (not found in current reporting). They also do not report any statutory change that adds or removes specific income types like municipal bond interest or untaxed Social Security from the ACA MAGI definition for 2026 (not found in current reporting).
8. Bottom line for consumers: check numbers, time deductions, and watch Congress
If your household’s 2026 MAGI might hover near 400% of FPL, small tax‑planning moves — especially HSA and above‑the‑line deductions — can change subsidy eligibility, and you should model those moves now; but the most consequential shift for many is policy: without congressional action the affordability backstop that allowed subsidies above 400% FPL will not apply in 2026 [4] [1]. Review authoritative Marketplace guidance and consult a tax professional before making decisions because advance credits are reconciled on your tax return and can trigger repayment obligations [7] [4].