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How to Get a $25,000 Healthcare Tax Credit Even If You Are Affluent 

by Kevin Kroskey, CFP^®, MBA 

As I write this in November 2025, the federal government is shut down for a record period. 

A key dispute is the scheduled expiration of Enhanced Premium Tax Credits (PTCs – added in 2021 under the American Rescue Plan and extended through 2025 under the Inflation Reduction Act. Lawmakers may soon vote on whether to renew these expanded ACA subsidies. Regardless of the outcome, it’s important to understand what the baseline, pre-2021 rules look like and how smart planning can still yield major benefits. This article focuses on financial and tax planning maneuvers for early retirees, though similar planning principles can apply to many other situations. 

Costs & Credits 

Many early retirees find they must rely on Affordable Care Act (ACA) policies to bridge the gap from employer-provided insurance or COBRA to Medicare at age 65. Health insurance premiums are expensive, but even affluent families may qualify for significant tax credits through thoughtful planning. 

Premium costs depend simply on age, location, and tobacco use. 

David and Susan, both 62 and non-smokers, face premiums starting near $17,000 per year for a Bronze plan and exceeding $26,000 for the benchmark second-lowest-cost Silver plan (SLCSP). A Gold plan? That’ll cost even more ounces of the real metal. Ouch! 

While they once paid premiums pre-tax through work, they now must pay with after-tax dollars. Double ouch! 

But the Premium Tax Credit (PTC) may help them save up to $25,000 a year. The PTC is a refundable federal credit that caps what you pay for health insurance as a percentage of income. To qualify under pre-2021 law, household income must fall between 100% and 400% of the Federal Poverty Line (FPL). Within that range, expected premium contributions rise from roughly 2% to 10% of income. (The temporary Enhanced PTC lowered the cap to 8.5% of income and removed the 400% cliff through 2025.) 

For a household of two, the 2025 FPL is $21,150, making 400% equal to $84,600. As long as their income stays below that level, David and Susan qualify for the credit. 

The PTC depends on the benchmark plan’s cost – the SLCSP – which runs $26,292 per year for them. At 400% of FPL, their expected contribution is about 8% of income, or $6,733. Subtracting this from the benchmark plan yields a $17,867 tax credit, which climbs to over $25,000 at lower income levels. 

The credit applies regardless of plan level. For a Bronze plan, it could nearly or fully offset the entire premium. 

Planning Moves 

PTC eligibility depends on Modified Adjusted Gross Income (MAGI) – your AGI plus normally untaxed income such as municipal-bond interest or the nontaxable portion of Social Security. If Congress fails to renew the Enhanced PTCs, going even $1 over $84,600 in 2026 could erase the entire credit. Triple ouch! 

You might think, I can’t keep my income that low. Maybe you can – even with significant wealth. Once retired, you gain control over how income appears on your tax return. Withdrawals can come from pre-tax IRAs or 401(k)s, tax-free Roth IRAs, or after-tax savings. 

Suppose David and Susan withdraw $120,000 annually ($10,000 monthly) from their IRA. Their AGI equals $120,000, and after the standard deduction, their taxable income is roughly $87,800. Their federal tax bill is about $10,000, leaving $9,200 in monthly spendable income – but no PTC. 

If they instead withdraw $84,600 and use Roth IRA or bank cash for additional spending, they now receive a $17,867 PTC. That’s like saving nearly $1,500 per month in after-tax money. 

Even if all assets are in pre-tax accounts, options exist. Consider bunching income in one year to forgo the PTC, then keep income low in subsequent year(s) to claim it. Or temporarily use a home-equity line of credit (HELOC) to fund expenses, then repay it once on Medicare. Borrowing $100,000 at 7% interest costs $7,000 – but could preserve a $17,867 credit. That math works. 

Astute readers may ask if lowering income far below 400% FPL is better. Often yes, but only to a point. As the PTC phases out, each additional dollar of income can effectively be taxed at 22–30%, combining income and lost-credit effects. Understanding these tradeoffs is key to setting the right income target in your tax-smart retirement plan. 

The Bottom Line 

Healthcare costs are a major concern for retirees. If enhanced PTCs expire, many Americans – especially those above 400% of the poverty line – will face higher premiums. Small businesses and employees using ACA coverage instead of group plans will also feel the impact. 

Still, significant credits remain for those under 400% of FPL. Optimizing them requires careful coordination among your retirement-income strategy, investment management, and tax planning. Doing it alone is challenging. Working with an advisor who integrates all these moving parts makes it far more achievable. 

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Kevin Kroskey, CFP^®, MBA is the Founder of True Wealth Design, providing “Accounting, Tax & Wealth Solutions To Help You Plan Smarter and Live Better.” This article is for educational purposes only. The strategies referenced apply to Accredited Investors or Qualified Purchases per SEC regulations. To explore how these strategies may apply to you, call or email kkroskey@truewealthdesign.com.

Opinions and claims expressed above are those of the author and do not necessarily reflect those of ScripType Publishing.