Understanding What Counts as Income for a Marketplace Plan

Navigating health insurance can be complex, especially when determining what counts as income for a marketplace plan. When you apply for health insurance through the Health Insurance Marketplace, your eligibility and the amount of financial assistance you can receive are primarily based on your income. But what exactly counts as income? Let’s break it down.

 

What is Considered Income?

 

When applying for a Marketplace plan, you need to report your household income, which includes the combined income of all members of your household. The Marketplace uses Modified Adjusted Gross Income (MAGI) to determine your eligibility for subsidies. Here’s a detailed look at what typically counts as income:

1. Wages and Salaries

This is the most straightforward form of income. It includes all the money you earn from your job, whether it’s a regular salary, hourly wages, tips, bonuses, or commissions. Make sure to report the total income before any deductions.

2. Self-Employment Income

If you’re self-employed, you need to report the net income you earn from your business. This is your gross income minus any allowable business expenses. Be sure to keep accurate records of your income and expenses to report this correctly.

3. Unemployment Compensation

If you’re receiving unemployment benefits, these payments count as income and should be included in your application.

4. Social Security Benefits

Most Social Security benefits are counted as income. This includes retirement and disability benefits. However, Supplemental Security Income (SSI) is not considered income for Marketplace purposes.

5. Retirement and Pension Income

Income from retirement plans, pensions, and annuities should be included. This also applies to withdrawals from traditional IRAs and 401(k) plans, but not from Roth IRAs.

6. Alimony

If you receive alimony, this counts as income. However, note that for divorces finalized after December 31, 2018, alimony payments are no longer considered taxable income under the Tax Cuts and Jobs Act, and thus not included in MAGI.

7. Rental and Royalty Income

Any income you earn from renting out property or from royalties should be reported. This includes both the rental income and any associated expenses that you can deduct.

8. Investment Income

This includes interest, dividends, and capital gains. All earnings from investments should be counted, including those from stocks, bonds, and mutual funds.

9. Other Income

Other sources of income that should be included are:

  • Canceled debt (if it’s taxable)
  • Gambling winnings
  • Court awards
  • Jury duty pay (if you gave it to your employer)
  • Strike pay

What Doesn’t Count as Income?

Certain types of income do not need to be reported for a Marketplace plan. These include:

  • Child Support: Payments received for child support are not counted as income.
  • Gifts and Inheritances: These are generally not considered taxable income.
  • Supplemental Security Income (SSI): As mentioned earlier, SSI is not counted.
  • Veterans’ disability payments: These benefits are excluded from income calculations.

Adjustments to Income

Your Modified Adjusted Gross Income (MAGI) starts with your Adjusted Gross Income (AGI) and adds back certain deductions. Some common adjustments that might affect your AGI include:

  • Student Loan Interest Deduction
  • Educator Expenses
  • Tuition and Fees
  • Contributions to Retirement Accounts (e.g., traditional IRA contributions)
  • Self-Employment Tax Deduction

Importance of Accurate Income Reporting

Accurately reporting your income is crucial because it determines your eligibility for premium tax credits and other savings. Overestimating or underestimating your income can result in paying higher premiums or having to pay back some of the financial assistance when you file your taxes.

Conclusion

Understanding what counts as income for a Marketplace plan is essential for ensuring you receive the correct amount of financial assistance and avoid any penalties. Always keep detailed records of your income and consult with a tax professional if you have any questions about what to report. By accurately reporting your income, you can make the most of the benefits available through the Health Insurance Marketplace.