Do households above 400% of the federal poverty level qualify for premium tax credits under the American Rescue Plan or Inflation Reduction Act?
Executive summary
Households with incomes above 400 percent of the federal poverty level (FPL) were made eligible for the Affordable Care Act’s premium tax credits by the American Rescue Plan (ARPA) and that eligibility was extended through the 2025 coverage year by the Inflation Reduction Act (IRA) — meaning from 2021 through 2025 people above 400% FPL can qualify if they meet the other rules [1] [2]. Absent new Congressional action, the statutory 400% cap reverts for 2026 and later tax years, returning eligibility to the pre‑ARPA rule that generally limited credits to households ≤400% FPL [3] [4].
1. How ARPA changed the 400% rule and what the IRS says
The American Rescue Plan Act of 2021 temporarily eliminated the ACA’s traditional upper income limit so that taxpayers with income above 400% of FPL could receive premium tax credits for the 2021 and 2022 coverage years, a change the IRS documents in its guidance and that applied to those two years as an explicit ARPA provision [3] [1]. The IRS guidance also underscores that for tax years other than 2021 and 2022 the longstanding limit remained in statute — a point intended to remind readers that the ARPA change was framed as temporary before later congressional extensions [3].
2. The Inflation Reduction Act extended the expansion through 2025
Congress extended the ARPA expansion in the Inflation Reduction Act, which carried the enhanced eligibility and larger subsidies forward through the end of 2025, so the practical effect was that people with incomes above 400% of FPL could claim premium tax credits across 2021–2025 if they otherwise met eligibility rules [2] [1]. Multiple policy analysts and briefs concur that the IRA’s extension made the enhancements effective through the 2025 coverage year, increasing the number of households eligible for marketplace subsidies [5] [6].
3. The rules that still apply: household MAGI floor, reconciliation and repayment
Even with ARPA/IRA enhancements, claimants must meet the basic MAGI thresholds and other eligibility rules: generally a household must have income at or above 100% of the federal poverty level to qualify for a premium tax credit, and advance payments are reconciled on tax returns with potential repayment obligations [7] [3]. Historically, households with income at or above 400% of FPL had to repay all excess advance premium tax credits; under ARPA/IRA the subsidy availability changed for 2021–2025 but reconciliation rules and caps on repayment still differ by income level and year [3] [8].
4. Practical exceptions and policy nuances cited by analysts
Policy organizations note an important functional nuance: enhancements effectively removed the “subsidy cliff,” and in some interpretations eligibility was further tied to whether benchmark plan premiums would exceed a certain share of income—commonly cited as 8.5 percent—so people above 400% FPL whose marketplace premiums would otherwise surpass that threshold could qualify under the enhanced rules [9] [10]. Analysts also point out that some special rules (for example, unemployment treatment in 2021) applied only in narrow circumstances and were not all carried forward by the IRA [3] [11].
5. The cliff ahead: what happens in 2026 and limits of available reporting
Multiple sources warn that unless Congress acts to further extend ARPA/IRA provisions, the expanded eligibility for those above 400% FPL will sunset at the end of 2025 and the pre‑ARPA cap (ineligibility above 400% FPL for most enrollees) will return in 2026, a factual projection grounded in the statutory sunset dates cited by policy briefs and public information sites [4] [12]. Reporting and official guidance in the provided sources do not document any post‑2025 legislative change, so this analysis cannot assert outcomes beyond the cited extensions and documented statutory language [2] [13].