Before You Pick a 2027 ACA Plan, Decide What Your 2027 Income Will Be

Which Income Counts

The marketplace uses modified adjusted gross income. That is your adjusted gross income plus tax-exempt interest and any Social Security benefits the IRS does not tax.

For an early retiree, these items count. Withdrawals from a traditional IRA or 401k count. So do Roth conversions, taxable interest and dividends, realized capital gains, pension payments, rental profit and the taxable part of Social Security.

These items do not count. Qualified Roth withdrawals stay out. So does the basis portion of a brokerage sale, because you are getting your own money back. Cash in the bank stays out too. That is why a retiree who spends cash and basis can hold MAGI far below the level of spending.

The IRS Settles a Wrong Estimate When You File

The marketplace pays your credit to the insurer each month, based on the income you reported. After the year ends you file Form 8962 and compare the credit you received with the credit you earned on your real income. If you received too much, you repay it.

That used to have a limit. Households under 400% of the poverty line repaid no more than a capped amount. The IRS says that cap no longer applies starting with tax year 2026. You now repay the full excess.

Here is how it plays out for a couple, ages 60 and 62, in New Jersey. We estimate their 2027 benchmark premium at $27,504, which is the 2026 figure raised by the KFF median increase of 15%. We explain that estimate in the post on who pays the 2027 increase.

The first row is an ordinary miss. The couple expected a quiet year, then took $20,000 more from the IRA. They owe $2,460.

The second row is the costly one. They reported $80,000, finished at $90,000, and crossed the 400% line at $86,560. The marketplace paid $19,332 of credit on their behalf, and they earned none of it. They repay all of it, and the Roth conversion or gain that caused the extra $10,000 comes with its own tax bill.

The third row shows the safe direction. Reporting more than you earn costs you cash each month and returns it as a refund at tax time. You get the $2,460 back when you file.

Building an Estimate You Can Live With

Start with your spending plan for 2027 and list where each dollar comes from. Mark every source that counts as MAGI. The total is your estimate.

Then decide about conversions and gains before you enroll. A conversion is the one item you choose, so it should fit inside the number you report. Many early retirees wait until late in the year to set the conversion amount, because by then they know the rest of their income.

Leave a cushion under the lines that matter. For 2027 the 400% line is $86,560 for a couple and $63,840 for one person. Silver plans also carry extra cost-sharing reductions below 250% of the poverty line, which is $54,100 for a couple and $39,900 for one person. A year with a surprise, like a stock sale or a larger IRA draw, can cross either line.

When something changes mid-year, tell the marketplace. The IRS advises you to report income changes promptly so the advance credit adjusts. Waiting until you file removes that chance.

Then Pick the Plan

Once you set your income, the plan comparison is easier. The credit follows the benchmark plan’s price, so compare what each plan costs you after the credit. Look at the deductible and the out-of-pocket maximum next to the premium. The 2027 ceiling for a standard Silver plan rose to $12,000 for one person, and we cover that in the 2027 subsidy and out-of-pocket post.

To test a few income levels before you enroll, use the ACA subsidy calculator. It shows your premium, your credit and where the 400% line falls at each income.