How expiring ACA health insurance subsidies may affect Roth conversions

Here are some key things to know about ACA health insurance subsidies — and how changes could impact future Roth conversions.

Enacted via the Affordable Care Act, the premium tax credit was designed 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 above 400% of the federal poverty level, a benefit that was extended through 2025. The legislation also capped a household’s out-of-pocket health insurance premium costs at 8.5% of income.

The higher eligibility for 2025 leaves “more room to create income” via Roth conversions while still leveraging a portion of ACA health insurance subsidies, according to Tommy Lucas, a certified financial planner at Moisand Fitzgerald Tamayo in Orlando, Florida. His firm is ranked No. 69 on CNBC’s Financial Advisor 100 list for 2025. 

For 2025, the earnings threshold amounted to $103,280 for a family of three, according to The Peterson Center on Healthcare and KFF, which are health-care policy organizations.

However, the ACA subsidies were not addressed in President Donald Trump’s “big beautiful bill,” and will expire after 2025 without action from Congress.

Depending on what Congress decides, it could change how much income certain retirees choose to incur for future Roth conversions, Lucas said.

Of course, Roth conversion projections typically involve multiple factors beyond current-year tax implications, including long-term financial goals, lifetime taxes and legacy planning.

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

“People who make more than 400% of [federal poverty level] will definitely pay more for ACA premiums,” said CFP John Nowak, founder of Alo Financial Planning in Mount Prospect, Illinois. He is also a certified public accountant.

But if you’re over that income threshold, there would be no risk of reducing or eliminating the premium tax credit. That could make Roth conversions more appealing without the threat of “extra tax” via lower subsidies, he said.

Of course, investors still need to consider how raising their adjusted gross income could trigger other tax consequences, experts say. 

For example, boosting your adjusted gross income could trigger higher Medicare Part B and Part D premiums.