Update: On December 24, 2025, we added a fact sheet with new data showing that only a very small number of individuals with incomes over 10 times the federal poverty level—$156,500 for a single individual, or $211,500 for a couple—would receive the premium tax credit with the enhancements in place.
A key sticking point in the government shutdown debate is the upcoming reductions in the premium tax credit (PTC), particularly how the credit declines as income increases. Without action by Congress, the reductions expected in 2026 include reimposing an eligibility cliff at 400 percent of the federal poverty level—a bit over $60,000 for a single person. With the cliff in place, the tax credit falls suddenly to zero when income crosses this line.
Some argue that providing the PTC past the cliff is an unnecessary giveaway to the rich. But this is not the case. In fact, the PTC without the cliff is income-limited—it just phases out gradually rather than dropping off suddenly. For example, with the enhancements in place, the PTC for a 40-year-old with average premiums falls to zero at an income of a little over $70,000. There are other reasons not to reimpose the cliff. Given the high cost of health coverage, virtually all Americans receive some kind of federal assistance to pay for it, whether from Medicare, Medicaid, or the tax exclusion for employer coverage. With or without the enhancements, the PTC is available only to people without other affordable coverage options. For those beyond the cliff, the enhanced PTC is already smaller on average than the tax benefit from the tax exclusion for employer-sponsored coverage. Reimposing the cliff would worsen this disparity. The cliff—and therefore this disparate treatment—falls disproportionately on older people, those in high-premium areas (which are heavily rural areas), and small business owners. More generally, cliffs are widely considered bad policy because they are inequitable and create perverse incentives. Finally, the PTC is especially ill-suited to a cliff, as it is advanceable, which creates the risk that a small income change triggers a large tax liability.
