The short answer
ACA subsidies are based on your modified adjusted gross income (MAGI) for the year — an estimate you make when you enroll. Getting it right matters, because if you underestimate and earn more, you may have to repay part of your subsidy at tax time. MAGI includes most of your taxable income plus a few items that are added back, and it uses your whole household's income.
So the key is knowing what counts, what doesn't, and whose income to include.
What counts and what doesn't
MAGI generally includes wages, self-employment income, taxable interest and dividends, capital gains, taxable retirement distributions, and Social Security benefits (even the non-taxable portion is added back for this purpose), among others. It does not include things like Supplemental Security Income, most gifts, or the non-taxable parts of certain income. It's your adjusted gross income with a few add-backs. Our guide to estimating income for ACA subsidies walks through the process.
Household matters too: you generally count the income of everyone in your tax household, not just yourself.
How to estimate accurately
Base your estimate on realistic expectations for the year, and update the Marketplace if your income changes so your subsidy adjusts. Overestimating a little is safer than underestimating, since underestimating can lead to repayment. For variable income, err toward caution and reconcile at tax time. Our guide to how subsidies work covers the mechanics.
The goal is an estimate close enough that you neither owe a big repayment nor miss out on help you qualified for.
Frequently Asked Questions
What income counts for an ACA subsidy?
Your modified adjusted gross income — wages, self-employment income, interest, dividends, capital gains, taxable retirement distributions, and Social Security (including the non-taxable portion), for your whole tax household.
What income doesn't count?
Items like Supplemental Security Income, most gifts, and certain non-taxable income generally aren't included. MAGI is your adjusted gross income with a few specific add-backs.
What happens if I estimate my income wrong?
If you underestimate and earn more, you may repay part of your subsidy at tax time. Update the Marketplace when income changes, and err toward caution with variable income.
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