Form 8962 Line 5: Your Percentage of the Poverty Line

Most lines on an IRS form ask you to copy a number from somewhere else and move on. Line 5 of Form 8962 is different, because the instruction buried in it — drop the decimals instead of rounding — is the kind of detail that decides whether a household keeps thousands of dollars in health insurance help or loses every cent of it. The line asks you to express your household income as a percentage of the federal poverty line (FPL), and a single point of difference on either side of 400 percent can mean the world. That has always been a quirky bit of arithmetic, but for tax year 2026 it becomes one of the most consequential rounding choices in the entire return.

The short answer: On line 5 you divide your household income by the federal poverty line for your family size, multiply by 100, and then truncate — you drop every digit after the decimal point rather than rounding up. A result of 399.9 percent becomes 399, which keeps you under the 400 percent threshold; a household genuinely over 400 percent enters 401 instead. For 2026, landing on the wrong side of that line is no longer a soft penalty. The enhanced subsidies expired at the end of 2025, so one dollar of income over 400 percent of the poverty line wipes out your premium tax credit (PTC) for the whole year.

The literal line-5 calculation: divide, multiply, then drop the decimals

The mechanic comes straight from the IRS Instructions for Form 8962. After you compute the ratio of your household income to the applicable federal poverty line, the instructions say, verbatim: “Do not round; instead, multiply this number by 100 (to express it as a percentage) and then drop any numbers after the decimal point.” The word that matters is drop. You are not rounding to the nearest whole number, which would push some figures up; you are simply deleting everything to the right of the decimal point and keeping what is left.

The IRS provides its own examples to make the rule concrete, and they are worth reading slowly. A ratio of 0.9984 becomes 99 — not 100, even though it is just shy of one. A ratio of 1.8565 becomes 185, not 186. And, most tellingly, 3.997 becomes 399, not 400. That last example is the one to remember. A household sitting at 399.7 percent of the poverty line is, by the form’s own arithmetic, at 399 percent, comfortably under the threshold. The truncation rule is a feature, not a rounding error: it consistently works in the taxpayer’s favor near the boundary, because it never rounds a high-399 figure up into 400 territory.

Before you can run that division, you need the two inputs right. Household income for this calculation is your modified adjusted gross income (MAGI) plus the MAGI of any dependents who are required to file their own return. The federal poverty line you divide by is not the current year’s guideline but the prior year’s figure for your coverage year, matched to your family size. Get either input wrong and the percentage on line 5 is wrong, no matter how carefully you handle the decimals.

The 400% cap and when to enter 401

The instructions handle the ceiling with a deliberately blunt rule. When your household income is more than 400 percent of the federal poverty line, you do not write 405 or 412 or whatever the math produces. The instructions say, verbatim, to “Enter 401 here and on line 5 of Form 8962.” In other words, 401 is a flag, not a literal percentage. It signals to the IRS that you crossed the 400 percent line, and the precise amount over no longer matters for this purpose — once you are above 400, the form treats you simply as above.

That is why the gap between 399 and 401 is so much wider than two percentage points of arithmetic suggests. There is no 400 on line 5 as a practical matter: you are either at 399 or below, carried there by the drop-the-decimals rule, or you are flagged at 401 and above. The form has no middle ground, which is exactly what makes the truncation instruction in the previous section so valuable to anyone whose income lands close to the edge.

The 2026 subsidy cliff returns — and why 2025 was different

Here the year matters more than almost anything else on the form, and the two rules must not be blurred. For tax year 2025, the enhanced premium tax credits created by the American Rescue Plan Act and extended by the Inflation Reduction Act were still in effect. The IRS Instructions state plainly: “For tax year 2025, taxpayers with household income that exceeds 400% of the federal poverty line for their family size may be allowed a PTC.” Entering 401 on a 2025 return therefore did not automatically zero out the credit; a household above 400 percent could still receive a partial premium tax credit, with the amount tied to what a benchmark plan would cost relative to income.

For tax year 2026, that cushion is gone. Those enhanced credits expired on December 31, 2025, and Congress did not extend them, so the original 400 percent cliff returns in full force. Household income over 400 percent of the federal poverty line means zero premium tax credit for the entire year — not a reduced credit, not a phased step-down, but nothing. Worse, any advance premium tax credit you received month to month during 2026 to lower your marketplace premiums has to be repaid when you reconcile the return on Form 8962. A family that estimated its income just under the line and guessed wrong can owe back a full year of subsidy.

The dollar figures that define this cliff are approximate, and KFF puts them, for 2026 coverage in the continental United States, at roughly $62,600 for a single person and about $128,600 for a family of four. Treat those as estimates: they are derived from the 2025 federal poverty guidelines used for 2026 coverage, they scale with family size, and they run higher in Alaska and Hawaii. But the shape of the cliff is the same everywhere. One dollar of income beyond the threshold for your household flips a partial-relief world into an all-or-nothing one. For 2027 coverage the line moves with the 2026 guidelines, to $63,840 for one person and $132,000 for a family of four in the 48 states, against the IRS table for 2027 that runs from 2.15% to 10.22% of income (2027 ACA subsidy table and the cliff in dollars). The guidelines HHS publishes in January 2027 will set the line for 2028 coverage (2027 poverty guidelines projection).

What the 2026 draft Form 8962 changes: line 6 and the missing repayment cap

The IRS posted its draft Form 8962 for 2026 on April 21, 2026, and two lines carry the new law. Line 6, “Reserved for future use” on the 2025 form, now asks: “Did you enter 401% on line 5?” A “No” continues to line 7. A “Yes” reads: “You are not eligible to take the PTC. If advance payment of the PTC was made, see the instructions for how to report your excess advance PTC repayment amount.” The cliff described above is no longer a matter of instructions; it is a question printed on the form.

The second change is quieter and costs more. On the 2025 form, line 27 computed the excess advance credit, line 28 applied a “Repayment limitation” from Table 5 of the instructions, and line 29 carried the smaller of the two to Schedule 2. For 2025 those caps were $375 for a single filer and $750 for any other status when household income was under 200 percent of the poverty line, $975 and $1,950 from 200 to 300 percent, and $1,625 and $3,250 from 300 to 400 percent. On the 2026 draft, line 27 sends the full difference “here and on Schedule 2 (Form 1040), line 1a,” and lines 28 and 29 both read “Reserved for future use.” The reason is statutory: Public Law 119-21, section 71305, struck 26 U.S.C. 36B(f)(2)(B), the subparagraph that limited repayment for households under 400 percent. From tax year 2026, every dollar of advance credit above the credit you actually qualify for is repaid, at any income level.

The practical effect lands on households whose income rises during the year without crossing the cliff. A family that estimated 220 percent of the poverty line, received $6,000 of advance credit, and finished 2026 at 320 percent would, on a 2025 return, have repaid no more than $3,250, the cap for a family that ends the year between 300 and 400 percent; on the 2026 form it repays the full difference between the $6,000 and the credit recomputed at 320 percent, with no cap. That can be the entire $6,000 if, at the higher income, the benchmark plan costs less than the family’s required contribution. The draft instructions for the 2026 form, dated October 20 and posted by the IRS on November 5, 2026, confirm it in their What’s New section: “if the advance payments of the PTC made on a taxpayer’s behalf exceed the PTC allowed for the year, the taxpayer must repay the full excess amount when filing the tax return. The former repayment limitations based on household income as a percentage of the federal poverty line no longer apply.” The practical advice follows from that: report income changes to the marketplace during the year rather than waiting for the return.

Two more 2026 rules in the draft instructions: below 100% and income-based enrollment

The same What’s New section lists two changes that get far less attention than the cliff, and both decide whether a household can claim any credit at all.

Income below 100 percent of the poverty line. Through 2025, a lawfully present immigrant who was ineligible for Medicaid solely because of immigration status could claim the credit even with household income under 100 percent of the poverty line. Section 71302 of Public Law 119-21 struck that provision, 26 U.S.C. 36B(c)(1)(B), for tax years beginning after 2025. The draft instructions now say that “If your household income is below 100% of the federal poverty line, you are not eligible for the PTC unless you meet the requirements described under Estimated household income at least 100% of the federal poverty line.” That exception still exists for everyone, and it has five conditions: no one can claim you as a dependent; you or someone in your tax family enrolled in a marketplace plan; the marketplace estimated at enrollment that your 2026 household income would be at least 100 percent but no more than 400 percent of the poverty line; advance credit was paid for at least one month of 2026; and you otherwise qualify as an applicable taxpayer. The instructions add that you don’t meet it if no advance credit was paid, or if you gave the marketplace incorrect information “with intentional or reckless disregard for the facts.” If you meet all five, you check “No” on line 6 and continue; if not, you check “Yes” and skip to line 9.

Coverage bought through an income-based special enrollment period. Section 71304 of the same law, which applies to plan years beginning after December 31, 2025, removes from the definition of a qualified health plan any plan enrolled in during a special enrollment period that an exchange offers on the basis of expected household income relative to the poverty line, unless the enrollment is connected to an event or change in circumstances that HHS specifies. The draft instructions put it plainly: such coverage “isn’t treated as a qualified health plan for purposes of the PTC unless the enrollment is connected to a QLE or another change in circumstances specified by HHS. You cannot claim the PTC for coverage that does not meet this requirement.” If you signed up in the middle of 2026 only because your income qualified you, and not because you moved, lost other coverage, married or had a child, those months don’t count for the credit, and any advance payments for them have to be reconciled. How CMS has handled the monthly enrollment window for people under 150 percent of the poverty line, and what changes for 2027, is covered in our 2027 ACA subsidy table.

The draft also prints the 2026 version of Table 2, the applicable figure you enter on line 7 once line 5 is settled. It starts at 0.0210 for anyone under 133 percent, jumps to 0.0314 at 133, reaches 0.0419 at 150, 0.0660 at 200 and 0.0844 at 250, and stays flat at 0.0996 from 300 through 400 percent. That flat top is why a household at 399 percent pays the same share of income for the benchmark plan as one at 300 percent, while one at 401 gets no credit at all.

Why line 5 matters more now

In 2025, a slip across 400 percent cost you something but not everything. In 2026 it can cost you the entire credit and trigger repayment, which turns a quiet line near the top of Form 8962 into a genuine financial fault line. That is why the drop-the-decimals instruction deserves the attention it rarely gets: it is the one mechanism on the form that can legitimately keep a borderline household at 399 instead of nudging it to 400. If your income is anywhere near the threshold, this is the year to compute line 5 carefully, confirm your MAGI and your dependents’ filing requirement, and understand exactly how truncation works before you sign. For the broader picture on personal income taxes, see our taxes hub; and if you are also untangling other figures where one box quietly drives a taxable result, our explainer on when 1098-T box 5 exceeds box 1 walks through a similar trap.

Sources

• IRS, Instructions for Form 8962 — https://www.irs.gov/instructions/i8962
• IRS, Instructions for Form 8962 (2026), draft dated October 20, 2026 — https://www.irs.gov/pub/irs-dft/i8962—dft.pdf
• Public Law 119-21, sections 71302, 71304 and 71305 — https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm
• KFF, A steep subsidy cliff looms for older, middle-income enrollees if ACA enhanced tax credits expire — https://www.kff.org/quick-take/a-steep-subsidy-cliff-looms-for-older-middle-income-enrollees-if-aca-enhanced-tax-credits-expire/