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.

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 $1,950; on the 2026 form it repays whatever the reconciliation on lines 11 through 27 computes, which can be the entire $6,000 if the higher income eliminates the credit. The instructions for the 2026 form had not been posted when this was written, but the statute and the draft lines are enough to plan on: report income changes to the marketplace during the year rather than waiting for the return.

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
• 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/