Income Strategies to Keep Your ACA Subsidy

How It Works

HSA contributions are an above-the-line deduction, meaning they reduce your MAGI directly. You must be enrolled in a High Deductible Health Plan (HDHP) to contribute. Contributions can be made by you or your employer, and grow tax-free.

Maximum MAGI Reduction

$4,300 individual / $8,550 family (2026 limits). Add $1,000 catch-up if 55+.

Best For

Anyone enrolled in an HDHP who needs to reduce MAGI by a moderate amount. Particularly effective for self-employed individuals.

How It Works

Pre-tax 401(k) contributions reduce your W-2 income, which directly lowers your MAGI. This is one of the most powerful tools for employed individuals because the contribution limits are high.

Maximum MAGI Reduction

$23,500 in 2026 ($31,000 if age 50+). Employer match does NOT reduce your MAGI.

Best For

W-2 employees whose income is near the 400% FPL cliff. Maxing out a 401(k) can easily bring someone from above the cliff to below it.

How It Works

Deductible Traditional IRA contributions reduce your MAGI. However, deductibility phases out if you (or your spouse) have a workplace retirement plan and your income exceeds certain thresholds.

Maximum MAGI Reduction

$7,000 in 2026 ($8,000 if age 50+). Subject to deductibility limits.

Best For

Self-employed individuals without a workplace plan, or spouses without employer coverage. Check IRS deductibility rules for your situation.

How It Works

Capital gains and Roth conversions count as income in the year they occur. By timing when you sell investments or convert retirement accounts, you can control which year the income appears.

Maximum MAGI Reduction

Varies — potentially tens of thousands of dollars by deferring gains to a year when you have other deductions or lower income.

Best For

Investors, early retirees, and anyone doing Roth conversions. Especially important if a large capital gain would push you over 400% FPL.

How It Works

Self-employed individuals can deduct business expenses, the employer-equivalent portion of self-employment tax (7.65%), and contributions to SEP-IRAs or Solo 401(k)s. All of these reduce MAGI.

Maximum MAGI Reduction

SEP-IRA: up to 25% of net self-employment income (max ~$69,000). Solo 401(k): $23,500 employee + 25% employer contribution.

Best For

Freelancers, gig workers, consultants, and small business owners. The combination of business deductions + retirement contributions can dramatically reduce MAGI.

How It Works

While standard charitable deductions only help if you itemize, Qualified Charitable Distributions (QCDs) from an IRA for those 70½+ can reduce MAGI directly. Donor-advised funds let you bunch deductions.

Maximum MAGI Reduction

QCDs: up to $105,000 per year directly from IRA. Itemized charitable deductions: up to 60% of AGI for cash donations.

Best For

Retirees age 70½+ who have required minimum distributions. Also useful for anyone with large one-time income who can bunch charitable gifts.