What to include as income
When you fill out a Marketplace application, you’ll need to estimate what your household income is likely to be for the year.
- Marketplace savings are based on your expected household income for the year you want coverage, not last year’s income. You must make your best estimate so you qualify for the right amount of savings.
- You will be asked about your current monthly income and then about your yearly income.
Whose income to include in your estimate
For most people, a household consists of the tax filer, their spouse if they have one, and their tax dependents, including those who don’t need coverage.
The Marketplace counts estimated income of all household members.
What income is counted
The Marketplace uses an income number called modified adjusted gross income (MAGI) to determine eligibility for savings. It’s not a line on your tax return.
See what’s included in MAGI and how to estimate it.
Your MAGI is the total of the following for each member of your household who’s required to file a tax return:
- Your on your federal tax return
Your total (or “gross”) income for the tax year, minus certain adjustments you’re allowed to take. Adjustments include deductions for conventional IRA contributions, student loan interest, and more. Adjusted gross income appears on IRS Form 1040, line 11.
Refer to glossary for more details.
- Excluded foreign income
- Nontaxable Social Security benefits (including tier 1 railroad retirement benefits)
- Tax-exempt interest
- MAGI does not include Supplemental Security Income (SSI)
- Your
The chart below shows common types of income and whether they count as part of MAGI. If you expect income types not shown or have additional questions, see details on what the IRS counts as income.
| Income type | Include as income? | Notes |
|---|---|---|
| Federal Taxable Wages (from your job) | Yes | If your pay stub lists “federal taxable wages,” use that. If not, use “gross income” and subtract the amounts your employer takes out of your pay for child care, health insurance, and retirement plans. |
| Tips | Yes | |
| Self-employment income | Yes | Include “net self-employment income” you expect — what you’ll make from your business minus business expenses. Note: You’ll be asked to describe the type of work you do. If you have farming or fishing income, enter it as either “farming or fishing” income or “self-employment,” but not both. |
| Unemployment compensation | Yes | Include all unemployment compensation that you receive from your state. Visit CareerOneStop's Unemployment Benefits Finder for more information about unemployment in your state. |
| Social Security | Yes | Include both taxable and non-taxable Social Security income. Enter the full amount before any deductions. |
| Social Security Disability Income (SSDI) | Yes | But do not include Supplemental Security Income (SSI). |
| Retirement or pension Income | Yes | Include most IRA and 401k withdrawals. (See details on retirement income in the instructions for IRS publication 1040). Note: Don’t include qualified distributions from a designated Roth account as income. |
| Alimony | Depends | Divorces and separations finalized before January 1, 2019: Include as income. Divorces and separations finalized on or after January 1, 2019: Don’t include as income. |
| Child support | No | |
| Capital gains | Yes | |
| Investment income | Yes | Include expected interest and dividends earned on investments, including tax-exempt interest. |
| Rental and royalty income | Yes | Use net rental and royalty income. |
| Excluded (untaxed) foreign income | Yes | |
| Gifts | No | |
| Supplemental Security Income (SSI) | No | But do include Social Security Disability Income (SSDI). |
| Veterans’ disability payments | No | |
| Worker’s Compensation | No | |
| Proceeds from loans (like student loans, home equity loans, or bank loans) | No | |
| Child Tax Credit checks or deposits (from the IRS) | No |
Report income changes to the Marketplace
Once you have Marketplace health insurance, it’s very important to report any income changes as soon as possible.
If you don’t report these changes, you could miss out on savings or wind up having to pay money back when you file your federal tax return for the year.
As a seasoned expert in healthcare policy and financial planning, I bring a wealth of knowledge and practical experience to guide you through the intricacies of income estimation for Marketplace applications. My expertise is grounded in years of working with individuals navigating the complexities of healthcare coverage and ensuring accurate income reporting for optimal savings.
Key Concepts:
-
Marketplace Application and Savings:
- When completing a Marketplace application, it's crucial to estimate your household income for the upcoming year.
- Savings offered by the Marketplace are based on the expected household income for the coverage year, not the previous year's income.
- Accurate estimation is essential to qualify for the correct amount of savings.
-
Whose Income to Include:
- A household typically comprises the tax filer, their spouse (if applicable), and tax dependents, including those not requiring coverage.
- The Marketplace considers the estimated income of all household members.
-
Modified Adjusted Gross Income (MAGI):
- MAGI is the income metric used to determine eligibility for savings; it's not a line on the tax return.
- It includes the total gross income for the tax year, minus allowable adjustments like IRA contributions and student loan interest.
-
What's Included in MAGI:
- Components of MAGI include federal taxable wages, excluded foreign income, nontaxable Social Security benefits, tax-exempt interest, etc.
- Notably, Supplemental Security Income (SSI) is excluded from MAGI calculations.
-
Types of Income and Inclusion in Estimate:
- Federal Taxable Wages: Include "federal taxable wages" or "gross income" minus specified deductions.
- Self-Employment Income: Include net self-employment income, specifying the type of work.
- Unemployment Compensation: Include all received from the state.
- Social Security: Include taxable and non-taxable income but exclude SSI.
- Retirement or Pension Income: Include most IRA and 401k withdrawals, excluding qualified Roth account distributions.
-
Other Income Types:
- Alimony: Inclusion depends on divorce/separation date.
- Child Support: Not included.
- Capital Gains and Investment Income: Include expected earnings.
- Rental and Royalty Income: Use net income.
- Excluded Foreign Income: Not included in MAGI.
- Gifts and Loan Proceeds: Not included.
-
Reporting Changes:
- It's critical to report any income changes promptly after obtaining Marketplace insurance to avoid potential issues and ensure accurate savings.
By following these guidelines and reporting income changes as necessary, individuals can optimize their Marketplace coverage and financial benefits. If you have further questions or need assistance, feel free to reach out.
