2027 ACA Subsidy Cliff: How Freelancers Can Stay Under $63,840

Open enrollment for 2027 coverage starts on November 1. If you buy your plan on the Marketplace, the number to watch is $63,840, which is 400% of the poverty line for one person. Below it you get a premium tax credit. A dollar above it, you get none. The enhanced credits that had removed this limit expired at the end of 2025, and insurers are asking for higher premiums on top of that. KFF’s analysis of 276 insurers in all 50 states and D.C., updated in August, found a median proposed increase of 15% for 2027. Some of these are finalized rates and some are still proposed. They also vary a lot by state: healthinsurance.org’s weighted averages, updated in October, run from 3% in Vermont and under 7% in New York, Iowa and Utah to 29% in Arizona.

The credit is based on your adjusted gross income, and a freelancer controls that more than most people. This guide shows how much a Solo 401(k), SEP IRA or HSA contribution has to cut to get under the line, and which of them can do it at different profit levels. How the credit works, and the 2026 version of the cliff, are in the 2026 ACA Marketplace guide.

Where the 2027 cliff is

The IRS says eligibility for a year is based on the most recent poverty guidelines on the first day of the annual open enrollment period (IRS Q&A). For 2027 coverage that means the 2026 guidelines from HHS, which apply to the 48 contiguous states and D.C. (Alaska and Hawaii are higher):

Household size	Poverty line (2026 guidelines)	400% (credit cutoff)
1	$15,960	$63,840
2	$21,640	$86,560
3	$27,320	$109,280
4	$33,000	$132,000

• 1

  Poverty line (2026 guidelines)

  $15,960

  400% (credit cutoff)

  $63,840

• 2

  Poverty line (2026 guidelines)

  $21,640

  400% (credit cutoff)

  $86,560

• 3

  Poverty line (2026 guidelines)

  $27,320

  400% (credit cutoff)

  $109,280

• 4

  Poverty line (2026 guidelines)

  $33,000

  400% (credit cutoff)

  $132,000

Poverty lines: HHS 2026 poverty guidelines, 48 contiguous states and D.C. The 400% column is my multiplication. Household income is the modified AGI of everyone in your tax family.

Between 300% and 400% of the poverty line, you’re expected to pay a flat 10.22% of your income toward the benchmark plan in 2027, up from 9.96% in 2026 (Rev. Proc. 2026-26). The credit is the benchmark premium minus that amount. Enrollment opens November 1, and December 15 is the last day to pick a plan that starts on January 1 (HealthCare.gov). If your insurer is leaving the Marketplace, as Cigna is in 11 states, see what to do when your insurer leaves.

What a few hundred dollars is worth

Say the benchmark silver plan costs you $8,900 a year. That figure is assumed, $1,100 above the $7,800 in our 2026 example, and yours depends on your age and where you live. This is a single person’s credit around the cutoff:

Household income (MAGI)	% of poverty line	Your expected contribution	Credit
$60,000	376%	$6,132	$2,768
$63,840	400%	$6,524	$2,376
$64,000	Over 400%	Not eligible	$0

• $60,000

  % of poverty line

  376%

  Your expected contribution

  $6,132

  Credit

  $2,768

• $63,840

  % of poverty line

  400%

  Your expected contribution

  $6,524

  Credit

  $2,376

• $64,000

  % of poverty line

  Over 400%

  Your expected contribution

  Not eligible

  Credit

  $0

Illustrative. Poverty line $15,960 (2026 HHS guidelines, one person). All rows are in the 300% to 400% band, so the applicable percentage is 10.22% (Rev. Proc. 2026-26). Contribution = income × 10.22%; credit = $8,900 − contribution. Rounded to the dollar.

Below the line, every $1,000 you cut raises the credit by about $102. Crossing it costs the whole $2,376.

Which deductions lower the income that counts

For the credit, household income is modified AGI: the AGI on your return plus foreign earned income, tax-exempt interest and the untaxable part of Social Security benefits (Form 8962 instructions). So anything that comes off before AGI helps:

• traditional Solo 401(k) contributions, both the employee deferral and the profit-sharing part,
• SEP IRA contributions,
• HSA contributions, up to $4,500 for self-only coverage in 2027 (Rev. Proc. 2026-24), if you have an HSA-eligible plan,
• the deductible half of self-employment tax, which you get without doing anything, and
• the self-employed health insurance deduction. It’s an adjustment to income on Schedule 1, so the premiums you pay after the credit lower your MAGI too, but it interacts with the credit itself (Publication 974), so the numbers below leave it out.

Roth contributions don’t count: there’s no deduction, so your AGI stays where it was.

Worked example: $90,000 of profit

You’re single, under 50, with $90,000 of Schedule C net profit in 2027 and no other income. First, how far above the line you are:

1. 1

   Schedule C net profit

   $90,000
2. 2

   Half of self-employment tax

   Deducted before AGI

   −$6,358
3. 3

   AGI and MAGI with no contributions

   524% of the poverty line

   $83,642
4. 4

   400% cutoff, single person

   $15,960 × 4

   $63,840
5. 5

   Income to cut

   $19,802

Illustrative. Self-employment tax and the contribution maximums come from the retirement contribution calculator on this site (2026 limits).

Four ways to handle it:

Choice	MAGI	% of poverty line	Credit
No contribution	$83,642	524%	$0
SEP IRA, the maximum ($16,728)	$66,914	419%	$0
SEP IRA maximum plus $4,500 HSA	$62,414	391%	$2,521
Solo 401(k), $20,000	$63,642	399%	$2,396

• No contribution

  MAGI

  $83,642

  % of poverty line

  524%

  Credit

  $0

• SEP IRA, the maximum ($16,728)

  MAGI

  $66,914

  % of poverty line

  419%

  Credit

  $0

• SEP IRA maximum plus $4,500 HSA

  MAGI

  $62,414

  % of poverty line

  391%

  Credit

  $2,521

• Solo 401(k), $20,000

  MAGI

  $63,642

  % of poverty line

  399%

  Credit

  $2,396

Illustrative. $8,900 benchmark premium, 10.22% applicable percentage, poverty line $15,960. SEP maximum from the retirement contribution calculator (2026 limits); HSA limit from Rev. Proc. 2026-24. Rounded to the dollar.

A SEP is capped at 20% of your adjusted profit, which leaves it $3,074 short of the line. A Solo 401(k) adds a $24,500 employee deferral on top of the same employer-style share, so it gets under with room to spare. The other route is a SEP plus an HSA, if your plan is HSA-eligible. Bronze Marketplace plans are, starting in 2026; the HSA guide explains.

The credit alone isn’t a reason to put $20,000 into a retirement account. You get the $2,396 credit plus the income tax savings on the contribution, but the money stays locked in the account. If you wouldn’t save that much anyway, see how close you can get with what you’d contribute regardless.

Which plan closes which gap

The same calculation at four profit levels, for a single person under 50, with the maximums at 2026 limits. The 2027 retirement plan limits are typically announced in the fall, and I’ll update the table then.

Net profit	MAGI before contributions	Income to cut	SEP IRA maximum	Solo 401(k) maximum	What works
$72,000	$66,913	$3,073	$13,383	$37,883	Either, SEP needs 23% of its maximum
$78,000	$72,489	$8,649	$14,498	$38,998	Either, SEP needs 60% of its maximum
$90,000	$83,642	$19,802	$16,728	$41,228	Solo 401(k), or SEP plus HSA
$110,000	$102,228	$38,388	$20,446	$44,946	Solo 401(k) at 85% of its maximum

• $72,000

  MAGI before contributions

  $66,913

  Income to cut

  $3,073

  SEP IRA maximum

  $13,383

  Solo 401(k) maximum

  $37,883

  What works

  Either, SEP needs 23% of its maximum

• $78,000

  MAGI before contributions

  $72,489

  Income to cut

  $8,649

  SEP IRA maximum

  $14,498

  Solo 401(k) maximum

  $38,998

  What works

  Either, SEP needs 60% of its maximum

• $90,000

  MAGI before contributions

  $83,642

  Income to cut

  $19,802

  SEP IRA maximum

  $16,728

  Solo 401(k) maximum

  $41,228

  What works

  Solo 401(k), or SEP plus HSA

• $110,000

  MAGI before contributions

  $102,228

  Income to cut

  $38,388

  SEP IRA maximum

  $20,446

  Solo 401(k) maximum

  $44,946

  What works

  Solo 401(k) at 85% of its maximum

Illustrative: single, under 50, no other income, 2026 contribution limits as a stand-in for 2027. Maximums from the retirement contribution calculator on this site. At $110,000, a SEP plus a $4,500 HSA reaches $24,946, still $13,442 short. Excludes the self-employed health insurance deduction.

A SEP is enough when you’re a few thousand dollars over. When you’re far over, only a Solo 401(k) has the room. Paperwork and deadlines differ too, and the Solo 401(k) vs. SEP IRA guide covers both.

Two windows: 2026 and 2027

Your 2026 return is still open. For 2026 coverage the cutoff is $62,600, and if you got advance credit and end up above it, you owe all of it back. Contributions for 2026 lower 2026 income, and some can be made after the year ends: a SEP up to the return’s due date including extensions, an HSA until April 15, 2027, and the employer part of a new Solo 401(k) up to the return’s due date including extensions, if your provider allows retroactive adoption (employee deferrals in a new plan only until the filing deadline without extensions). If you already have a Solo 401(k), sign the deferral election by December 31. The 2026 ACA guide has a worked example.

For 2027, the estimate is the hard part. You give the Marketplace your expected 2027 income during open enrollment, but you won’t know your profit until next year. If your income swings, build the estimate from your records, update it during the year, and make contributions as you go instead of leaving them for April 2028. Saving When Your Income Is Irregular covers how to size them.

How to run your own numbers

1. Estimate your 2027 net profit, then subtract half of your self-employment tax to get AGI before contributions.
2. Subtract the cutoff for your household size (table above) from that AGI. The difference is the amount to cut.
3. Compare it with what a SEP and a Solo 401(k) allow at your profit in the retirement contribution calculator.
4. Count only what you will really contribute, and update your Marketplace application if your income changes.
5. Set aside the tax you’ll still owe, with the Freelance Tax Calculator.