ACA Cliff Glossary

Premium Tax Credit (PTC)

A refundable federal income-tax credit established under 26 U.S.C. § 36B for individuals and families who buy health insurance through the ACA Marketplace. The credit equals the difference between the second-lowest-cost Silver plan (SLCSP) available to the household and the household's required contribution (a % of MAGI per the §36B(b)(3)(A) applicable-percentage table), floored at zero.

Source: 26 U.S.C. § 36B

Advance Premium Tax Credit (APTC)

The PTC paid in advance during the plan year directly to the insurer, based on projected household income. At tax filing, the household reconciles APTC paid vs. PTC actually due on Form 8962. If APTC exceeded PTC due (e.g., income rose during the year), the household repays the excess up to statutory caps; if APTC was less than PTC due, the household claims the difference as a refundable credit.

Source: 26 U.S.C. § 36B(c)(2)(B)

Modified Adjusted Gross Income (MAGI)

For ACA PTC purposes, MAGI is AGI plus tax-exempt interest, the non-taxable portion of Social Security benefits, and foreign earned income excluded under § 911. This definition is statute-specific to § 36B and differs from MAGI as used for IRA contribution phase-outs or other code sections.

Source: 26 U.S.C. § 36B(d)(2)(B)

Adjusted Gross Income (AGI)

Gross income (wages, interest, dividends, capital gains, business income, etc.) minus above-the-line deductions (HSA contributions, deductible Traditional IRA, SEHI, one-half SE tax, SEP-IRA or Solo 401(k), student-loan interest, and a handful of others). Shown on Form 1040 line 11.

Source: IRS Form 1040 instructions

Federal Poverty Level (FPL)

Annual income thresholds published by HHS ASPE used to determine eligibility for federal assistance programs. ACA PTC eligibility uses the prior-year FPL guidelines for the household size and region (contiguous 48 + DC, Alaska, Hawaii). For TY2026 PTC, the calculator uses the 2025 HHS ASPE Poverty Guidelines.

Source: HHS ASPE Poverty Guidelines

Applicable-percentage table

The table at 26 U.S.C. § 36B(b)(3)(A)(i), updated annually by IRS revenue procedure, that sets a household's required contribution as a percentage of MAGI based on the household's MAGI expressed as a percentage of FPL. For TY2026, IRS Rev. Proc. 2025-25 sets the table with no row above 400% FPL — restoring the pre-ARPA hard cliff.

Source: IRS Rev. Proc. 2025-25 (IRB 2025-32), 26 U.S.C. § 36B(b)(3)(A)

Related: Premium Tax Credit (PTC) ·

Benchmark plan / SLCSP

The second-lowest-cost Silver plan available to the household in their rating area. Under §36B(b)(3)(B), the SLCSP is the benchmark against which the PTC is calculated — the credit equals the SLCSP premium minus the household's required contribution, floored at zero. The household can use the credit toward any metal-level plan, not just Silver.

Source: 26 U.S.C. § 36B(b)(3)(B)

Household income

For PTC purposes, household income is the tax filer's MAGI plus the MAGI of every dependent required to file a federal return (those over the gross-income filing threshold), per 26 U.S.C. § 36B(d)(2)(A). Dependents who file only to claim a refund of withheld taxes are excluded.

Source: 26 U.S.C. § 36B(d)(2)(A)

Family size

For PTC purposes, family size equals the number of individuals for whom the taxpayer is allowed a dependency deduction for the tax year — the taxpayer, the taxpayer's spouse (if any), and the taxpayer's dependents. Family size determines the FPL threshold the household's MAGI is measured against.

Source: 26 U.S.C. § 36B(d)(1)

Employer-sponsored coverage affordability

Under §36B(c)(2)(C), an offer of employer-sponsored coverage that is affordable (employee-only premium below the §36B(c)(2)(C)(i)(II) percentage of household income — 9.96% for plan year 2026) and provides minimum value disqualifies the employee from receiving the PTC. The family-glitch rule, fixed by Treasury regulation in 2022, evaluates affordability separately for family-coverage offers.

Source: 26 U.S.C. § 36B(c)(2)(C)

Related: Minimum value ·

Minimum value

An employer-sponsored plan provides minimum value under §36B(c)(2)(C)(ii) if it covers at least 60% of the total allowed costs of benefits (i.e., a 60% actuarial value, equivalent to Bronze metal level) and includes substantial coverage of physician services and inpatient hospital services.

Source: 26 U.S.C. § 36B(c)(2)(C)(ii)

Medicaid expansion

The ACA option for states to expand Medicaid eligibility to adults with household incomes up to 138% FPL. As of 2026-05, 41 states + DC have expanded; 10 states have not. Non-expansion creates the coverage gap for adults below 100% FPL who earn too much for traditional state Medicaid but too little for the PTC.

Source: KFF Status of State Medicaid Expansion Decisions

Coverage gap

The zone of household incomes below 100% FPL in non-expansion states where adults earn too much to qualify for traditional state Medicaid but too little to qualify for the PTC (which starts at 100% FPL). Affects an estimated 1.5–2 million adults in the 9 non-expansion states without §1115 waivers (Wisconsin is the exception).

Source: KFF Status of State Medicaid Expansion Decisions

Wisconsin BadgerCare quirk

Wisconsin did not formally expand Medicaid under the ACA but covers adults to 100% FPL via a §1115 waiver (BadgerCare). The result: no coverage gap exists in Wisconsin — adults below 100% FPL enroll in BadgerCare, and adults between 100% and 138% FPL are eligible for the PTC instead. The calculator special-cases Wisconsin in its expansion-status logic.

Source: KFF Wisconsin BadgerCare brief

Related: Medicaid expansion · Coverage gap

Cost-sharing reduction (CSR)

Reduced deductibles, copays, and out-of-pocket maximums available to PTC-eligible households below 250% FPL who enroll in a Silver plan through the Marketplace. CSR is statutory under §1402 of the ACA but Treasury stopped paying CSR reimbursements to insurers in 2017; insurers responded by loading CSR cost into Silver premiums ("silver loading"), which incidentally inflates the SLCSP and therefore the PTC for all households.

Source: 42 U.S.C. § 18071

Related: Silver loading · Metal levels

Silver loading

The insurer practice of adding the cost of statutorily-required CSR subsidies to Silver-tier premiums (rather than spreading across all metal levels) after Treasury stopped reimbursing insurers for CSR in 2017. Silver loading is sanctioned by CMS and persists in nearly every state marketplace as of 2026; it increases Silver-tier premiums, which through the §36B(b)(3)(B) benchmark mechanic increases the PTC available to all PTC-eligible households.

Source: CMS Marketplace Rate Filing Guidance

Special Enrollment Period (SEP)

A window outside open enrollment during which an individual can enroll in or change a Marketplace plan after a qualifying life event — loss of other coverage, marriage, birth/adoption, permanent move to a new rating area, or income changes that newly qualify the household for Medicaid or CSR. SEP windows are typically 60 days from the qualifying event.

Source: healthcare.gov special enrollment

Related: Open enrollment

Open enrollment

The annual federal Marketplace enrollment window — typically November 1 through January 15 for coverage effective January 1 (or February 1 for late enrollees). State-based marketplaces sometimes set different windows; check your state marketplace for exact dates.

Source: healthcare.gov open enrollment dates

Qualified Health Plan (QHP)

A health insurance plan certified by an ACA Marketplace as meeting the essential-health-benefits, actuarial-value, and consumer-protection requirements of the ACA. Only QHPs are eligible for PTC and CSR subsidies. Off-Marketplace plans from the same insurers may have identical benefits but are not subsidy-eligible.

Source: 42 U.S.C. § 18021

Metal levels

ACA QHPs are categorized by actuarial value: Bronze (60%), Silver (70%), Gold (80%), Platinum (90%), and Catastrophic (limited to people under 30 or with a hardship exemption; ~60% AV with very high deductibles). PTC is computed against the Silver benchmark (SLCSP) and can be applied to any metal level. CSR is available only on Silver plans.

Source: 42 U.S.C. § 18022(d)

IRS Form 8962

The federal tax form used to reconcile APTC paid during the year against the PTC actually due based on year-end MAGI. A Form 8962 must be filed by anyone whose household received APTC during the year, regardless of whether the household ends up owing or being owed money.

Source: IRS Form 8962

Form 1095-A

The information return Marketplaces send to enrolled households in January, summarizing premiums paid, SLCSP figures, and any APTC paid during the year. The 1095-A is the primary input to Form 8962 reconciliation.

Source: IRS Form 1095-A

Recapture cap (repayment limitations)

Statutory caps under §36B(f)(2)(B) on how much excess APTC a household must repay if year-end MAGI is higher than projected. Caps are tiered by % of FPL and filing status, ranging from ~$375 single / $750 joint at <200% FPL to unlimited repayment at 400%+ FPL. The unlimited tier means a household that crosses the 400% FPL cliff during the year can face a clawback equal to all APTC received.

Source: 26 U.S.C. § 36B(f)(2)(B)

State-based marketplace (SBM) vs federally-facilitated marketplace (FFM)

States either operate their own ACA marketplace (SBM — e.g., Covered California, NY State of Health), run a state-based marketplace on the federal platform (SBM-FP — they make plan-management decisions but use healthcare.gov technology), or default to the federally-facilitated marketplace at healthcare.gov (FFM). As of 2026, ~20 states operate SBMs, ~7 operate SBM-FPs, and the rest use the FFM.

Source: CMS Marketplace Status Report

Related: Qualified Health Plan (QHP)

MFS abuse exception

Married Filing Separately (MFS) ordinarily disqualifies a household from receiving the PTC. Under 26 C.F.R. § 1.36B-2(b)(2), an MFS filer who is a victim of domestic abuse or spousal abandonment may claim the PTC despite filing MFS, by indicating the exception on Form 8962. The exception is narrowly construed and requires the taxpayer to certify the abuse/abandonment in good faith.

Source: 26 C.F.R. § 1.36B-2(b)(2)

Related: Premium Tax Credit (PTC)

Self-employed health insurance deduction (SEHI)

An above-the-line deduction under 26 U.S.C. § 162(l) that allows self-employed taxpayers (sole proprietors, partners, and >2% S-corp shareholders) to deduct premiums paid for medical, dental, and qualified long-term care insurance covering themselves, their spouse, and dependents — limited to the net earnings from the trade or business under which the plan is established. The deduction is taken on Schedule 1, line 17, and reduces both AGI and §36B MAGI. For Marketplace enrollees who also receive the PTC, §162(l) and §36B create a notorious circularity: the SEHI deduction reduces MAGI, which may increase the PTC, which reduces the net premium eligible for SEHI deduction, which changes MAGI again. IRS Rev. Proc. 2014-41 prescribes an iterative or simultaneous-equation method to resolve the loop; most tax software handles this automatically but the math is non-trivial.

Source: 26 U.S.C. § 162(l), IRS Rev. Proc. 2014-41, IRS Pub. 535 (SEHI worksheet)

Form 1040 Schedule 1

The IRS form on which taxpayers report additional income items (business income from Schedule C, capital gains flow-through, unemployment, etc., Part I) and above-the-line adjustments to income (Part II) that together with wages, interest, dividends, and capital gains reported directly on Form 1040 produce AGI on Form 1040 line 11. Part II adjustments are the principal levers for MAGI management for PTC purposes: educator expenses (line 11), HSA deduction (line 13), deductible part of SE tax (line 15), SEP / SIMPLE / qualified plans (line 16), SEHI deduction (line 17), penalty on early withdrawal (line 18), deductible IRA contribution (line 20), and student loan interest (line 21). Each dollar of Part II adjustment reduces both AGI and §36B MAGI dollar-for-dollar.

Source: IRS Schedule 1 (Form 1040)

Family glitch fix

Until 2022, IRS regulations evaluated employer-sponsored coverage affordability solely against the employee-only premium even when the employee was offered family coverage — meaning a family could be locked out of the PTC because the employee's self-only cost was "affordable," even if family coverage was prohibitively expensive. The October 2022 Treasury final rule at 26 C.F.R. § 1.36B-2(c)(3)(v) ("Affordability of employer coverage for related individuals") changed the test for family members: family-coverage affordability is now evaluated against the cost of family coverage, not employee-only. Effective for plan years beginning on or after January 1, 2023, this rule made roughly 1 million additional Americans eligible for the PTC. The employee's own PTC eligibility still keys off the self-only premium test under §36B(c)(2)(C); only the related-individuals branch was changed.

Source: 26 C.F.R. § 1.36B-2(c)(3)(v), Treasury Final Rule (87 FR 61979)

Catastrophic plan

A QHP metal tier defined at 42 U.S.C. § 18022(e) available only to individuals under age 30 or to anyone with a certified hardship or affordability exemption. Catastrophic plans have very high deductibles (equal to the §223(c)(2)(A) HDHP statutory out-of-pocket maximum) but cover three primary care visits per year and all ACA-required preventive services pre-deductible. Catastrophic plans are not eligible for the PTC or CSR — 26 U.S.C. § 36B(c)(3)(A) defines a "qualified health plan" for PTC purposes as one offered in the individual market, expressly excluding the catastrophic tier. Households eligible for both a Catastrophic plan and a subsidized Silver/Gold plan typically choose the latter unless paying the full unsubsidized premium of all tiers, in which case Catastrophic is often the lowest sticker price.

Source: 42 U.S.C. § 18022(e), 26 U.S.C. § 36B(c)(3)(A)

HSA contribution as MAGI move

A contribution to a Health Savings Account by an HSA-eligible individual (one covered by an HDHP and not enrolled in Medicare or other disqualifying coverage) is deductible above-the-line under 26 U.S.C. § 223(a) on Schedule 1, line 13. The deduction reduces AGI and therefore §36B MAGI dollar-for-dollar. For 2026, the §223(b) contribution limits are $4,400 self-only / $8,750 family, with a $1,000 catch-up at age 55+. For households near a PTC phase-out edge (e.g., 400% FPL hard cliff in TY2026, or the 250% FPL CSR cliff), funding an HSA before the April 15 filing deadline of the following year is one of the most tax-efficient retroactive MAGI reductions available — the contribution lowers MAGI, may unlock or expand PTC, and the dollars remain available to pay future qualified medical expenses tax-free.

Source: 26 U.S.C. § 223, IRS Rev. Proc. 2025-19 (2026 HSA limits), IRS Pub. 969

Traditional IRA deduction as MAGI move

A contribution to a Traditional IRA is deductible above-the-line on Schedule 1, line 20 under 26 U.S.C. § 219, subject to limits and to phase-outs under §219(g) when the taxpayer (or spouse) is an active participant in an employer retirement plan. For 2026, the §219(b) base contribution limit is $7,000, with a $1,000 catch-up at age 50+. Spousal IRAs under §219(c) allow a non-earning spouse to contribute against the working spouse's compensation. When deductible, the IRA contribution reduces AGI and §36B MAGI dollar-for-dollar, mirroring HSA mechanics. When the taxpayer or spouse is covered by a workplace plan and income exceeds the §219(g) phase-out range, the contribution becomes nondeductible and produces no MAGI move — in that case a Roth or backdoor Roth is generally preferable. Note: §36B MAGI for PTC is not the same as the §408A(c)(3) MAGI used for Roth contribution limits.

Source: 26 U.S.C. § 219, IRS Pub. 590-A

SEP-IRA / Solo 401(k) as MAGI move

Self-employed taxpayers and small-business owners can deduct contributions to SEP-IRAs (26 U.S.C. § 408(k)) and Solo 401(k)s (26 U.S.C. § 401(a) with §415(c) limits) above-the-line on Schedule 1, line 16. These are typically the largest MAGI move available to high-earning self-employed filers: the 2026 §415(c) total annual addition limit is $72,000 ($80,000 with the §414(v) age-50+ catch-up), against which a Solo 401(k) accepts both employee deferrals and employer profit-sharing. A SEP allows employer contributions up to 25% of net self-employment earnings (effectively ~20% after the SE-tax adjustment), capped at §415(c). Solo 401(k)s allow the same employer side plus the full §402(g) employee deferral ($23,500 for 2026, $31,000 catch-up at 50+), and so reach the §415(c) cap at far lower business income than a SEP. For PTC-edge cases, Solo 401(k) employee deferrals can be elected pre-MAGI-finalization through year-end and SEP / employer contributions through the extended filing deadline.

Source: 26 U.S.C. § 408(k) (SEP), 26 U.S.C. § 415(c), IRS Pub. 560

Tax-loss harvesting as MAGI move

Realizing capital losses in a taxable brokerage account allows the taxpayer to offset realized capital gains under 26 U.S.C. § 1211. Net capital losses in excess of gains are deductible against ordinary income up to $3,000 per year ($1,500 MFS) under §1211(b), with the unused balance carried forward indefinitely under §1212(b). The $3,000 ordinary-income offset reduces AGI and therefore §36B MAGI. The much larger lever is the gain-offset side: a household sitting on $40,000 of unrealized losses can use them to fully offset $40,000 of would-be realized gains, preventing those gains from inflating MAGI and pushing the household over a PTC cliff or CSR tier boundary. Beware the §1091 wash-sale rule, which disallows the loss if the same or a "substantially identical" security is repurchased within 30 days before or after the sale.

Source: 26 U.S.C. § 1211, 26 U.S.C. § 1091 (wash sale), IRS Pub. 550

Roth conversion timing

A Roth conversion under 26 U.S.C. § 408A(d)(3) — moving pre-tax dollars from a Traditional IRA / 401(k) into a Roth IRA — is fully taxable as ordinary income in the year of conversion and so directly increases AGI and §36B MAGI. Conversions sit on Form 1040 line 4b (and flow into AGI on line 11) with no above-the-line offset. For PTC recipients, a Roth conversion executed during a subsidy year can be catastrophic: pushing MAGI past 400% FPL in TY2026 triggers full APTC clawback (the §36B(f)(2)(B) recapture cap is unlimited at 400%+), and even smaller conversions can shrink the PTC dollar-for-dollar via the applicable-percentage table. The standard play is to defer Roth conversions to a low-income gap year (e.g., post-retirement, pre-Social Security, pre-RMD) when the taxpayer is not relying on the PTC, or to size the conversion to land precisely at a tier boundary in the smoothed-regime years.

Source: 26 U.S.C. § 408A(d)(3), IRS Pub. 590-A

Required Minimum Distribution (RMD)

The annual minimum amount that owners of Traditional IRAs, 401(k)s, 403(b)s, and most other tax-deferred retirement accounts must withdraw beginning at the applicable §401(a)(9) age — currently age 73 for those born 1951–1959 and age 75 for those born in 1960 or later, under the SECURE 2.0 Act (P.L. 117-328). RMDs are calculated under the §401(a)(9)(A) "Uniform Lifetime Table" by dividing the prior-year-end account balance by the published distribution period. RMDs are taxable as ordinary income and flow through to AGI / §36B MAGI. For early-retirees on the PTC who are approaching age 73, RMDs can push MAGI from a deeply-subsidized range into a partially-subsidized or no-subsidy range. Qualified Charitable Distributions (see QCD) are the primary planning tool to satisfy the RMD without inflating MAGI. The §4974 excise tax for missed RMDs is 25% of the shortfall (reduced from 50% by SECURE 2.0), with a further reduction to 10% if corrected within the §4974(e) correction window.

Source: 26 U.S.C. § 401(a)(9), SECURE 2.0 Act (P.L. 117-328), IRS Pub. 590-B

Qualified Charitable Distribution (QCD)

A direct transfer from an IRA to a §170(b)(1)(A) qualifying public charity made by an IRA owner who is age 70½ or older, authorized under 26 U.S.C. § 408(d)(8). The 2026 annual QCD limit (indexed) is $108,000 per individual under §408(d)(8)(F). A QCD counts toward the IRA owner's RMD for the year but is excluded from gross income, so it never enters AGI or §36B MAGI. QCDs are the single most efficient MAGI-management tool for charitably-inclined retirees on the PTC: a charitable contribution made by writing a personal check would only reduce taxable income via itemized deduction (and only above the §63(c) standard deduction), and would not reduce MAGI at all. A QCD reduces MAGI directly. Donor-advised funds and private foundations do not qualify under §408(d)(8)(B)(i).

Source: 26 U.S.C. § 408(d)(8), IRS Pub. 590-B (QCD rules)

Net Investment Income Tax (NIIT)

A 3.8% surtax under 26 U.S.C. § 1411 on the lesser of (a) net investment income (interest, dividends, capital gains, rental and passive income, etc.) or (b) the excess of "modified adjusted gross income" over a statutory threshold — $200,000 single, $250,000 MFJ, $125,000 MFS. The §1411 thresholds are not indexed for inflation and have not changed since the tax took effect in 2013. §1411 MAGI is AGI plus the §911 foreign earned income exclusion add-back — narrower than §36B MAGI. A household well into NIIT territory ($250K+ MFJ) is already past the 400% FPL PTC cliff in most rating areas for most family sizes, so NIIT and PTC rarely intersect in practice; the relevance is that the same investment-income decisions (Roth conversions, large realized gains, RMDs) that drive NIIT exposure also drive §36B MAGI. NIIT is reported on Form 8960.

Source: 26 U.S.C. § 1411, IRS Form 8960