Currently, you lose eligibility for ACA subsidies if your household income is over 400% of the federal poverty level. If nothing changes with the current laws, the table below are the official numbers that will govern eligibility in 2026.

Family Size	100% FPL (2025 Guideline)	MAGI Hard Cutoff for 2026
1 Person	$15,650	$62,600
2 Persons	$21,150	$84,600
3 Persons	$26,650	$106,600
4 Persons	$32,150	$128,600

So as a 2 person household, we will need to stay under $84,600. It’s a little tricky because that is just about exactly what our annual spend has been in the last few years.

Hopefully, we will continue to have tenants and since we will likely never raise the rent, it should be $32,040 right off the top. Leaving $51,960 to earn through work, dividends and interest. With a good size cash buffer (including the home payoff account) in a high interest savings account, if rates don’t drop too much more, we will likely earn around $7,000 in interest ($44,960).

• $1200 dividends from old work stock ($43,760)
• $2500 dividends from taxable account ($41,260)

That leaves us roughly $41,000 left to earn from work. These are all rough estimations that will have to be monitored throughout the year since $1 over could eliminate our ~$500/month subsidy. It is nice that we have some wiggle room if we do end up working more than intended. We both have access to contribute to our 401k if we need less income earned. Also, the bronze plans in 2026 are all supposed to offer the ability to contribute to an HSA. So as long as we stay on top of all the income earned, we should be able to manipulate any earned income.

The question I had for next year was is it better to play the game and keep the income below the ACA cliff or should we just maximize the lower tax rates and do Roth conversions?

I asked my friend Gemini for some additional analysis.

This changes the math entirely. In short: It is almost certainly NOT worth converting to the top of the 12% bracket if it causes you to fall off the ACA cliff.

Here is the mathematical breakdown of why the "Cliff" destroys the value of the Roth conversion in this specific scenario.

1. The “Subsidy Cliff” Explained

Under the expiration rules scheduled for 2026, eligibility for subsidies strictly cuts off if your Modified Adjusted Gross Income (MAGI) exceeds 400% of the Federal Poverty Level (FPL).

• Projected 2026 Limit (400% FPL for family of 2): ~$84,600 (This aligns with your $84k target).
• Income at $84,000: You pay a capped percentage of income for insurance. (You save ~$6,500).
• Income at $84,001: You pay full price. (You lose the entire ~$6,500).

2. The “Shadow Tax” Calculation

To see if the Roth conversion is worth it, we have to calculate the Effective Marginal Tax Rate on the extra money you convert.

Let's compare your two scenarios:

Scenario A: The "Tiptoe" Strategy

• MAGI: $84,000
• Federal Tax (approx): ~$5,700 (Standard deduction applies to tax, not MAGI).
• ACA Subsidy Savings: $6,500

Scenario B: The "Fill the Bucket" Strategy

• MAGI: ~$133,000 (To fill the 12% tax bracket space).
• Difference in Income converted: $49,000 ($133k – $84k).
• Additional Federal Tax: ~$5,880 (12% of $49,000).
• Lost ACA Subsidy: $6,500 (This acts as a tax).

The True Cost of that $49,000 Conversion:

Federal Tax $5,880 + Lost Subsidy $6,500 = $12,380

Your Effective Tax Rate:

$12,380\$49,000 = 25.3%

3. The Verdict

By converting that extra money, you are effectively paying 25.3% tax on it today.

• If your future tax rate is 12% or 15%: You lose money.
• If your future tax rate is 22%: You lose money (paying 25.3% now to save 22% later).
• If your future tax rate is 24%: You still arguably lose money due to the time value of paying taxes early.

Conclusion: You are better off staying under the $84,000 limit. The mathematical "cost" of losing the subsidy creates a tax hurdle that is higher than the standard 22% bracket you are trying to avoid in the future.

Invisible Sources of Income to the ACA Subsidy Calculation

The other problem is ensuring we actually have enough money to live on. We have a cash buffer, but if we need to, we can take from taxable or Roth contributions. Essentially, we may have to take from one pot while filling the others. It’s dumb that we have to play the game, but it seems pretty doable and worth it to save over $6,000 this year. Here are the potential sources of income identified by Gemini.

Cash Source	How It Works	Why It’s Safe
Roth IRA (Contributions)	Withdrawing money you originally put in.	You already paid tax on this money. It is a “return of your own cash.”
HSA Reimbursements	Withdrawing cash now for medical bills you paid in previous years.	Reimbursements for qualified medical expenses are tax-free at any time.
Taxable Brokerage (Basis)	Selling a stock for exactly what you paid for it (or less).	You made no profit. The IRS only taxes/counts the gain, not the principal.
Cash Savings	Spending money from your checking/savings account.	This is an asset, not income.
Loans (HELOC, Margin)	Borrowing against your house or stock portfolio.	Debt is not income. It is money you have to pay back.
Credit Card Rewards	Cash back or points redeemed for statement credits.	The IRS views this as a “rebate” on spending, not income.
Gifts / Inheritance	Receiving a cash gift or cash inheritance.	Generally not taxable income for the recipient.
Life Insurance Cash Value	Withdrawing cash up to the amount of premiums you paid.	Considered a “return of premium” (basis) first, not profit.

I was also considering filling up the cash buckets more for future years now or would alternating years of doing conversions be more advantageous or just not worry about future tax concerns since we don’t plan to make substantial income ever again??

*For the record, this is all just research for myself and is not advice for anyone else. A lot of info I have obtained from Gemini and did not double check the research myself.