Impact of ACA health insurance subsidy expiration on Roth conversions

Here’s what’s important to know about ACA health insurance subsidies and how the changes could affect future Roth conversions.

The premium tax credit, established by the Affordable Care Act, is intended to make marketplace health insurance more affordable for Americans with incomes between 100% and 400% of the federal poverty level.

In 2021, Congress expanded eligibility beyond 400% of the federal poverty level, extending benefits through 2025. The law also limited households’ out-of-pocket costs for health insurance to 8.5% of their income.

Tommy Lucas, a certified financial planner with Moisand Fitzgerald Tamayo in Orlando, Fla., said the increased eligibility for 2025 “gives people even more room to generate income” through Roth conversions while taking advantage of some of the ACA health insurance subsidies. His firm ranks No. 69 on CNBC’s 2025 100 Financial Advisors list.

In 2025, the income threshold will reach $103,280 for a family of three, according to the Peterson Center on Health Care and KFF, a health policy group.

However, the ACA subsidies were not featured in President Donald Trump’s “Big and Beautiful Bill,” and would expire after 2025 without action by Congress.

Lucas said Congress’ decisions could change how much income certain retirees choose to put into future Roth conversions.

Of course, Roth conversion projections typically include multiple factors beyond the current year tax impact, such as long-term financial goals, lifetime taxes, and legacy planning.

Once ACA subsidies expire, some investors may reduce their Roth conversions, while others may choose to convert more in 2026, experts say.

“People who make more than 400 percent of the[federal poverty level]are definitely going to pay more in ACA premiums,” said John Nowak, CFP, founder of Aro Financial Planning in Mount Prospect, Illinois. He is also a certified public accountant.

However, if you exceed that income threshold, there is no risk that your premium tax credit will be reduced or eliminated. That could make Roth conversions more attractive without the threat of “additional taxes” from subsidy cuts, he said.

Of course, investors need to consider how the increase in adjusted gross income may cause other tax consequences, experts say.

For example, as your adjusted gross income increases, your Medicare Part B and Part D premiums may increase.