- During the government shutdown, Congress is debating the future of health insurance subsidies under the Affordable Care Act, which currently help make Marketplace coverage more affordable for specific Americans.
- The ultimate choice may affect tax strategies for financial planning clients, such as Roth IRA conversions, according to specialists.
- Roth conversions can raise your income, potentially affecting your qualification for ACA premium tax credits.
As the House of Representatives discusses the Affordable Care Acthealth insurance subsidies amid the government shutdown, financial advisors are keeping an eye on how changes in 2026 might affectclient tax planning.
One problem in uncertainty isRoth IRA conversions, which are favored by younger retirees seeking to reduce expensespretax retirement account balances.
Roth conversions move pre-tax ornondeductible IRA funds to a Roth IRAto initiate tax-free growth. However, the converted amount increases your income, which may affect your qualification for ACA premium subsidies.
Here are some important facts about ACA health insurance subsidies — and how modifications might affect future Roth conversions.
How ACA health insurance financial assistance functions
Passed through the Affordable Care Act, thepremium tax creditwas created to help reduce the cost of health insurance in the marketplace for Americans whose income falls between 100% and 400% of the federal poverty guideline.
In 2021, the Congress increased the eligibility threshold beyond 400% of the federal poverty level, a change that was prolonged until 2025. The law also set a limit on a family's out-of-pocket health insurance expenses at 8.5% of their income.
Higher eligibility for 2025 provides "more opportunity to generate income" through Roth conversions while still utilizing some ACA health insurance subsidies, as stated by Tommy Lucas, a certified financial planner at Moisand Fitzgerald Tamayo in Orlando, Florida. His company is ranked No. 69 on Healthy Survival'sFinancial Advisor 100 list for 2025.
For the year 2025, the income limit was set at$103,280 for a household of three, according to the Peterson Center on Healthcare and KFF, which are organizations focused on health care policy.
However, the ACA financial assistance was not mentioned by the PresidentDonald Trump"big beautiful bill," and will expire after 2025 if Congress does not take action.
Based on Congress's decisions, it might affect the amount of income some retirees opt to generate for future Roth conversions, Lucas stated.
Certainly, Roth conversion estimates usually consider various elements in addition to immediate tax effects, such as long-term financial objectives, lifetime tax considerations, and estate planning.
Roth conversions may also rise
If the ACA subsidies end, some investors might decrease their Roth conversions, while others could decide to convert more in 2026, according to experts.
"Individuals earning more than 400% of the federal poverty level will certainly pay higher amounts for ACA premiums," stated CFP John Nowak, the founder of Alo Financial Planning in Mount Prospect, Illinois. He is also a licensed certified public accountant.
However, if your income exceeds that threshold, there would be no risk of the premium tax credit being reduced or removed. This could make Roth conversions more attractive without the concern of "additional taxes" due to decreased subsidies, he mentioned.
Certainly, experts note that investors must still take into account how increasing their adjusted gross income might lead to additional tax implications.
For instance, increasing your adjusted gross income might lead to higherMedicare Part B and Part D premiums.