Exchange programs will need to know "household income" in order to determine eligibility for premium tax credits. For many, this may be a guess and guessing wrong may require the taxpayer to pay back some overpayments.
To determine household income, you will need to figure out who is included. Household income includes income from the following people:
- children who live with you,
- unmarried partner who needs health coverage,
- any IRS dependent (even if they do not live with you), and
- anyone you take care of and who lives with you, age 21 or less.
This does NOT include:
- unmarried partner who does not need health coverage and who is not your dependent,
- your unmarried partner's children, if they are not your dependents,
- your parents who live with you, but file their own tax return and who are not your dependents
- other relatives who file their own tax returns and who are not your dependents
Your income can come from many sources but some are excluded. Your household income is your modified adjusted gross income (MAGI) (joint MAGI if you’re married), plus the MAGI of your dependents who make enough money to have to file a tax return.
MAGI is generally your adjusted gross income plus any tax-exempt Social Security benefits (except for Supplemental Security Income), tax-exempt interest, and tax-exempt foreign income. To add to the confusion, there appears to be at least three different definitions of modified adjusted gross income (MAGI) in the ACA. One definition is used for the new Medicare tax on investment income, one for premium subsidy eligibility and one for the individual mandate.
For the individual mandate, income includes:
- Net income from any self-employment or business (generally the amount of money you take in from your business minus your business expenses)
- Unemployment compensation
- Social Security payments, including disability payments--but not Supplemental Security Income (SSI)
- retirement income
- investment income
- pension income
- rental income
- other taxable income like prizes, awards, gambling
Income will not include:
- Child support
- Supplemental Security Income (SSI)
- Veterans’ disability payments
- Workers’ compensation
For additional information on this definition, please see:
If you have question on this or the ACA generally, please contact Kinney & Larson.