How does the 10.22% affordability test work in 2027?
The IRS sets the affordability line each year. For employer plan years that begin in 2027, Rev. Proc. 2026-26 puts it at 10.22% of household income, up from 9.96% in 2026. The test takes four steps:
- Find the cheapest plan the employer offers the employee alone (self-only) that meets minimum value.
- Take the employee’s share of its premium for the year: what comes out of the paycheck, not the employer’s part.
- Multiply the household’s expected 2027 income by 10.22%.
- Compare. A share at or below that amount is affordable, and the employee can’t get a tax credit. A share above it is unaffordable, and the employee can get one if household income is otherwise in range.
Household income here is modified adjusted gross income for everyone in the tax household who has to file, the same income the tax credit itself uses.
What does the test look like for one household?
An example household under the 2027 rules: a family of four expecting $60,000 in 2027, which is 181.8% of the poverty line. At 10.22%, that’s $6,132 a year, or $511 a month. The employee’s job offers self-only coverage for $150 a month and family coverage for $900 a month.
| Who | Monthly cost tested | Over $511? | Marketplace tax credit |
|---|---|---|---|
| The employee | $150, self-only | No | None: the offer is affordable |
| Spouse and two children | $900, family coverage | Yes | Yes, if otherwise eligible |
The employee stays on the job’s plan or pays full price on the Marketplace. The spouse and children can enroll in a Marketplace plan with a tax credit, because family coverage costs more than 10.22% of household income in 2027.
How are spouses and children tested?
A 2022 Treasury rule, Treasury Decision 9968, fixed what was called the family glitch. Since 2023, spouses and children are tested on the employee’s share for coverage of the employee and every family member offered coverage. The family plan also has to meet minimum value for those family members. The result can split, as in the example: the employee is blocked from the credit while the family isn’t.
What does minimum value mean for a job’s plan?
A job’s plan meets minimum value, per 26 CFR 1.36B-6, if it pays at least 60% of total allowed costs and substantially covers inpatient hospital and doctor services. A plan that fails minimum value doesn’t block the tax credit, whatever it costs.
What if you’re enrolled in the job’s plan already?
Enrollment in a job’s plan blocks the Marketplace tax credit for that month, whether or not the plan is affordable. Two exceptions apply under IRS rules:
- Automatic enrollment: someone auto-enrolled who drops the plan within the opt-out window isn’t treated as enrolled.
- Waiting periods: a required waiting period before coverage starts doesn’t count as an offer.
How do you check your household?
Coverage Decider’s calculator asks about each job offer in the household and runs this test separately for the employee and for the family, using the 2027 figure. The tax credit also needs household income between 100% and 400% of the poverty line: see the 2027 federal poverty level chart and the 2027 subsidy cliff. How Coverage Decider calculates lists the 2027 figures it uses.