People who don’t have health insurance from an employer plan can buy health insurance from a marketplace under the Affordable Care Act (ACA), also known as Obamacare. The monthly premiums are made affordable by a premium subsidy in the form of a tax credit calculated off of your household income relative to the Federal Poverty Level (FPL), also known as the federal poverty line, federal poverty guidelines, or HHS poverty guidelines.
The premium subsidy goes by a sliding scale. The higher your income relative to the FPL for your household size, the lower your premium subsidy is.
Modified Adjusted Gross Income (MAGI)
The income to compare against the FPL is the Modified Adjusted Gross Income (MAGI) for your household. It doesn’t matter how many family members in your household need coverage from the ACA health insurance.
There are many different definitions of MAGI in the tax code. MAGI for ACA health insurance is basically your Adjusted Gross Income (AGI) plus tax-exempt muni bond interest and untaxed Social Security benefits.
These incomes are included in your AGI, and therefore increase your MAGI for ACA health insurance:
- Wages, salaries, tips, and other employment income
- Business income
- Income from real estate rentals
- Unemployment benefits
- Pension and withdrawals from pre-tax IRAs or annuities
- Social Security benefits
- Interest, dividends, and capital gains
These above-the-line deductions are removed from your AGI and therefore reduce your MAGI for ACA health insurance:
- Pre-tax contributions to workplace retirement plans (pension, 401k, 403b, 457, etc.)
- Deductible contributions to Traditional IRAs
- HSA contributions
- Self-employment health insurance deduction
- One-half of the self-employment tax
- Pre-tax contributions to self-employment retirement plans (solo 401k, SEP-IRA, etc.)
- Student loan interest deduction
- Early withdrawal penalties on CDs
- Educator expenses
In addition, these items aren’t in the AGI but are added back to your MAGI for ACA health insurance:
- Untaxed Social Security benefits (see Calculator: How Much of My Social Security Benefits Is Taxable?)
- Tax-exempt interest from muni bonds
The Maximum Income
Before 2021, you qualified for the premium subsidy only if your MAGI was at 400% of the Federal Poverty Level (FPL) or below. You would lose all the subsidy if your MAGI went above 400% of FPL even by $1. You would have to pay back all the premium subsidy you already received when you file your tax return with the IRS. This was known as the ACA subsidy cliff.
The law changed in 2021, which turned the sharp cliff into a gradual slope. The Inflation Reduction Act extended the change through 2025. You still qualify for a premium subsidy now if your income goes over 400% of FPL. You just qualify for a lower amount as your income goes up. See ACA Health Insurance Premium Subsidy Slope.
This gradual slope only applies through 2025. The ACA subsidy cliff is scheduled to return in 2026.
In order to see how much you qualify for the premium subsidy, you have to know where the FPL is.
The Minimum Income
In addition to the maximum income to receive the premium subsidy, there’s also a minimum income to get accepted by the ACA marketplace. If your estimated income is too low, the ACA marketplace won’t accept you. They’ll send you to Medicaid instead.
The minimum income is 138% of FPL in states that expanded Medicaid, which is the case in most states and the District of Columbia. In states that didn’t expand Medicaid, the minimum income is 100% of FPL. According to a map from KFF, these states haven’t expanded Medicaid:
- Wyoming
- Wisconsin
- Kansas
- Texas
- Tennessee
- South Carolina
- Mississippi
- Alabama
- Georgia
- Flordia
However, unlike the maximum income, the minimum income is only evaluated at the time of open enrollment (or special enrollment), not at the time when you file your tax return with the IRS.
If your estimated income at the time of enrollment is below the minimum, the ACA marketplace won’t accept you, and they will refer you to Medicaid. If your estimated income at the time of enrollment is above the minimum and they accepted you, but your income for the year ended up below the minimum due to unforeseen circumstances, as long as you made the original estimate in good faith, you are not required to pay back the premium subsidy you already received.
The FPL Numbers
Here are the FPL numbers for coverage in 2023, 2024, and 2025. They increase with inflation every year in January. These are applied with a one-year lag. Your eligibility for a premium subsidy for 2024 is based on the FPL numbers announced in 2023. The new numbers announced in 2024 will be used for coverage in 2025.
There are three sets of numbers. FPLs are higher in Alaska and Hawaii than in the lower 48 states and Washington DC.
48 Contiguous States and Washington DC
| Household Size | 2023 coverage | 2024 coverage | 2025 coverage |
|---|---|---|---|
| 1 | $13,590 | $14,580 | $15,060 |
| 2 | $18,310 | $19,720 | $20,440 |
| 3 | $23,030 | $24,860 | $25,820 |
| 4 | $27,750 | $30,000 | $31,200 |
| 5 | $32,470 | $35,140 | $36,580 |
| 6 | $37,190 | $40,280 | $41,960 |
| 7 | $41,910 | $45,420 | $47,340 |
| 8 | $46,630 | $50,560 | $52,720 |
| more | add $4,720 each | add $5,140 each | add $5,380 each |
Alaska
| Household Size | 2023 coverage | 2024 coverage | 2025 coverage |
|---|---|---|---|
| 1 | $16,990 | $18,210 | $18,810 |
| 2 | $22,890 | $24,640 | $25,540 |
| 3 | $28,790 | $31,070 | $32,270 |
| 4 | $34,690 | $37,500 | $39,000 |
| 5 | $40,590 | $43,930 | $45,730 |
| 6 | $46,490 | $50,360 | $52,460 |
| 7 | $52,390 | $56,790 | $59,190 |
| 8 | $58,290 | $63,220 | $65,920 |
| more | add $5,900 each | add $6,430 each | add $6,730 each |
Hawaii
| Household Size | 2023 coverage | 2024 coverage | 2025 coverage |
|---|---|---|---|
| 1 | $15,630 | $16,770 | $17,310 |
| 2 | $21,060 | $22,680 | $23,500 |
| 3 | $26,490 | $28,590 | $29,690 |
| 4 | $31,920 | $34,500 | $35,880 |
| 5 | $37,350 | $40,410 | $42,070 |
| 6 | $42,780 | $46,320 | $48,260 |
| 7 | $48,210 | $52,230 | $54,450 |
| 8 | $53,640 | $58,140 | $60,640 |
| more | add $5,430 each | add $5,910 each | add $6,190 each |
Source:
- U.S. Department of Health and Human Services, Notice 2022-01166
- U.S. Department of Health and Human Services, Notice 2023-00885
- U.S. Department of Health and Human Services, Notice 2024-00796
The Applicable Percentages
The FPL numbers determine one aspect of your eligibility for the premium subsidy. How much you are expected to pay when you qualify for the premium subsidy is also determined by a sliding scale called the Applicable Percentages.
The lower your MAGI is relative to the FPL for your household size, the lower you’re expected to pay as a percentage of your MAGI. This table shows the applicable percentages through 2025:
| Income | 2022 – 2025 |
|---|---|
| < 133% FPL | 0% |
| < 150% FPL | 0% |
| < 200% FPL | 0% – 2% |
| < 250% FPL | 2% – 4% |
| < 300% FPL | 4% – 6% |
| <= 400% FPL | 6% – 8.5% |
| > 400% FPL | 8.5% |
We cover it in more detail in ACA Health Insurance Premium Tax Credit Percentages.
Plan Choice
The ACA marketplace offers many different plan options. They’re categorized into Bronze plans, Silver plans, Gold plans, and Platinum plans. Multiplying your MAGI by the applicable percentage determines your premium contributions toward a benchmark plan — the Second Lowest Cost Silver Plan.
You’ll pay more if you choose a more expensive plan. The annual premium you’ll pay for the plan of your choice will be:
MAGI * applicable percentage + (annual premium for the plan chosen – annual premium for the Second Lowest Cost Silver Plan)
You’ll pay less if you choose a less expensive Bronze plan.
When your MAGI is lower than 250% of FPL, in addition to having a lower applicable percentage, you also qualify for cost-sharing reductions, which lower your co-pays and out-of-pocket maximum. We cover it in more detail in Cost-Sharing Subsidy Under ACA Health Insurance.
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Alan Drakr says
Dear Carolyn,
The only deductions that reduce your income for purposes of calculating MAGI & your ACA health insurance subsidy are on lines 23 to 35 of Form 1040.
Amongst these deductions are two health insurance ones. Self employed health insurance premiums & HSA contributions. It is wise to contribute the maximum allowed to your HSA (if you select that type of high deductible policy) but not mandatory.
Also half of employment taxes paid by self-employed are deductible.
Other deductions are traditional IRA contributions (Roth contributions are not deductible) plus SEP & SIMPLE IRAs. Few other deductions apply to most people unless you have outstanding student loans, but review the list anyway.
Other deductions do not affect your MAGI, which is used to calculate your ACA health insurance premium subsidy.
I hope this helps.
Carolyn says
Alan & Harry, duly noted that you’ve reached opposite conclusions; but thanks for trying to help.
FinancialDave says
Carolyn,
If you need a tie-breaker, I’ll side with Harry. It is also the safer option to not take any deductions that you don’t absolutely know are appropriate. If you do you may likely owe a much bigger tax bill than you expect.
It is sad to say but in the first few years I was seeing many people with huge tax bills, many times because employees helping people at the exchanges didn’t really understand the details.
Safer is better in this case — just use your gross income with no deductions.
Dave
Carolyn says
Dave, thank you! But I’m afraid there’s still a misunderstanding. I don’t need to get my income down, I need to get it UP. Otherwise I’m too POOR to qualify for the subsidy! But it’s the cost of the dang insurance that’s impoverishing me!
What I want is to NOT deduct my insurance premiums, so my MAGI will NOT be reduced so far that I’m too poor to qualify for the subsidy.
You all have definitely educated me a bit, and inspired me to read everything I could find online. I cannot find my particular situation addressed. However, I also cannot find anything stating that I’m REQUIRED to deduct my insurance premiums or other medical expenses from my income for MAGI purposes of the subsidy, so long as I’m not deducting them on my tax return (which I won’t).
So at this point, I’m leaning toward NOT taking the deductions, thereby qualifying for the subsidy.
Harry Sit says
Alan and I are in agreement. No tie breaker is needed. The insurance premiums and out of pocket medical expenses don’t reduce your MAGI. The ‘G’ in MAGI stands for Gross. That’s before the insurance premiums and out of pocket medical expenses. You don’t have the option to use them to lower your MAGI even if you wanted to. The insurance premiums and out of pocket medical expenses only reduce your taxable income, which comes after the AGI. Taking those deductions after the AGI on your tax return does not affect your subsidy. AGI and taxable income are two separate concepts.
FinancialDave says
Carolyn,
That is not making sense to me – the lower your income the more ACA subsidy you get.
From your data (if you are single), which you stated your income was $24,000, you are at roughly 200% of the FPL (Federal Poverty Level) which is right in the middle of the subsidy range which goes up to 400%, where you have to repay any subsidy you got.
What am I missing here in your explanation?
Alan Drake says
Dear Carolyn,
Health insurance premiums for the self employed are deducted to determine MAGI (Line 29 of Form 1040).
I could see where there are two solutions that work mathematically.
Assume income before Line 29 deduction is $24,000 and unsubsidized premiums are $1,000/month.
Solution 1 – No subsidy, MAGI is $12,000 ($60 below 100% FPL)
Solution 2 – Subsidy is $850/month ($10,000/year). Line 29 is $1,800 (12x ($1,000 -$850) & MAGI is $22,200.
Both solutions work mathematically.
I suggest getting the subsidy during 2018 to “force” Solution 2.
Alan
Harry Sit says
Alan – Self-employed involves a whole set of complex circular calculations. You don’t have a choice to force one way or another. You have to follow the IRS prescribed methods. I lost track. Did Carolyn say she’s self-employed? If not, why confuse her?
Carolyn says
I AM self-employed, but not so you’d notice it, income-wise. I’m an artist, and my earnings don’t even pay for my costs as an artist (so I don’t try to deduct those).
I have savings from my previous employment for many years, and that’s the source of my $24K in income.
So I don’t know whether I’m “self-employed” from the IRS’s point of view.
Carolyn says
Dave, if your income is too little, you get no subsidy. I understand the floor is $12,060. Perhaps because if you make too little, you owe no taxes, and the subsidy is structured as a tax credit?
SO, yes, just looking at my income, I should be an ideal candidate for the subsidy; BUT since my health insurance premiums will cost nearly $17K in 2018, IF I am REQUIRED to deduct them from my income for purposes of calculating subsidy eligibility, the premiums alone will disqualify me for the subsidy that was supposed to help me afford them!
FinancialDave says
Carolyn,
You can only deduct the premiums to the extent they exceed your self-employment income, which you said is minimal. If you file a Sch C then your net income (which you said is small) is all that would be deducted from your gross income, which I then assume will make little difference to the calculation.
So once again I say your best estimate is to just use your gross income of $24k and don’t deduct anything. Or a closer approximation is to use your gross taxable income from your retirement accounts and forget about the SE income, since it gets subtracted anyway.
According to the IRS you are self-employed if you file a Sch C with a positive net income, but as I stated above the SE income is the only thing that can be offset with the health insurance premiums, so it sounds like this is a relatively small amount. What ever is offset here against your SE income cannot be used later if you itemize, but next year I think it will be very hard for you to itemize.
Dave
Carolyn says
Thank you, Dave. Fwiw, the info at the following link seems to say that “[p]ayments for insurance premiums you paid for policies that cover medical care” are deductible, regardless of whether one is self-employed: https://www.irs.gov/taxtopics/tc502 .
Harry Sit says
Deductible to arrive at a Gross Income and deductible to arrive at a taxable income are two different things. Please stop worrying and enjoy the holidays.
james says
Alan or anyone who can help pls,
I live in FL where medicaid was not expanded. I applied for ACA for 2018. My expected income is under 12k. If I make less, will I be required to payback the subsidy I will have received? Please let me know, thanks.
Alan Drake says
Dear James,
On the bottom left of page 8 of Instructions for Form 8962 it says, basically, that you get to keep the ACA Marketplace Premium subsidy that the Govt pays through the year if you applied in good faith.
My personal interpretation is if there was a reasonable chance that you could make more than $12,060 in 2018, you get to keep any subsidies paid to you through Marketplace.
Also, I do not foresee rigorous enforcement by the IRS of whether income projections by low income people were reasonable & made in good faith.
Auditing people that projected $12,500 in 2018 income in November 2017, but actually only made $9,000 in 2018 (as an example), are not an efficient use of IRS resources. The premium subsidy is only refundable if the IRS can show that the income projection was made in bad faith or you are not legally present in the USA.
https://www.irs.gov/pub/irs-pdf/i8962.pdf
TRL says
I live in Maryland. I receive $1069 in SSDI and $2974 in veterans disability. I have medicare and am wondering if I am “dual eligible” for medicaid. I get conflicting answers about whether to include my veterans disability as income.
Alan Drake says
My father passed away last year. I was forced to take an IRA distribution & converted my share of his 403b into an Inherited Roth account. This unexpectedly increased my 2016 income.
I explained this in a letter to Marketplace and how I estimated my income for 2018. They accepted this after a couple (three ?) weeks.
My impression is that they are inclined to say yes to your estimated 2018 income. This is not an IRS audit on your estimated income.
Just write down, with some specifics, your estimated 2018 income.
BTW, if you are in good health you may want to wait till age 70 to collect Social Security retirement.
Kit Grady says
Dear Dave,
My husband passed away last year and then we were using his S.S. for income as I was on the ACA. Now I just signed up for the ACA and will use his life insurance as investment income. I do not want to use spouse S.S. because I’m not 65.
Since there is now an income difference on my application this year, I have been asked to submit documentation to show this new income I plan to make with investments. What kind of documentation can I send? Can my financial advisor send something that satisfies the ACA folks. Thank you for your help in advance.
FinancialDave says
Kit,
In most cases life insurance is not taxable income, so would not be applicable since it does not show up on your 1040 as income. If you are over 60 then it is possible to file for Widow’s SS benefits on your husband’s record and postpone claiming on your own record, but your Widow’s benefit would be reduced because you are less than FRA. Seek guidance from your financial advisor.
Alan & Kit,
In any case whatever is done will have to be reconciled with your real income and subsidy during next years tax season. In other words you may either have to pay some of it back if your income estimate is low or you will get a tax refund if the income estimate is high for 2018.
Alan Drake says
There is a cap on how much you must repay if you underestimate your future income (as I discovered in the year my father passed and my income was higher than expected).
As a broadly general rule of thumb, if you are in your 50s or 60s, the cap will limit your liability for receiving excessive premium subsidies due to significantly underestimating income.
For young people, the subsidies are much smaller and Marketplace insured taxpayers may find that the excessive premium subsidy is below the caps listed below. So they will just pay back the excessive subsidy.
The caps are based on your reported AGI. In 2018, if your AGI income is below 200% FPL, you will pay back no more than $300.
Below 300% FPL & above 200% FOL, there is a $750 cap on excessive premium subsidy payback.
Below 400% FPL but above 300% FPL, the payback cap is $1275.
If your reported income in 2018 is above 400% FPL ($48,240 for a single person), there is no cap on the premium subsidy payback. You must pay back every dollar of subsidy.
FinancialDave says
Alan,
Thanks for stating the limits on the repayment side of the equation. This will all be reconciled on the 8962 during next years tax season (unless some tax law changes). In most cases “some” amount will either be repaid to the IRS up to possibly a limit, or all of the amount due you will be credited to your tax bill.
lynn says
alan do you know what happens if you overestimate and end up falling below the $12,060 minimum requirement?
Alan Drake says
Bottom left of page 8
https://www.irs.gov/pub/irs-pdf/i8962.pdf
Basically, unless the IRS can show you predicted your future income in bad faith (hard to do) or are not legally present in the US, you get to keep the premium subsidy. No premium subsidy refund if your income falls below 100% FPL in a non-expansion of Medicaid state (or 138% FPL in a Medicaid expansion state) without bad faith or being an illegal immigrant.
Liz says
On the other side of this; if I am a sub chapter S can I start (in february2018) a solo 401k to increase my IRA deduction and lower AGI?
Harry Sit says
Pre-tax contributions to a solo 401k lower your AGI, yes. They are not the same as IRA deduction though. You can do both if the lowered income allows a deduction for the traditional IRA contribution.
Liz says
Thanks for the response! My goal is to lower income and stay under 400% of FPL. I will be a few K over after T IRAand HSA contributions. I can skip the T IRA contrib if a larger SOLO 401k contrib will reduce income for the ACA. I haven’t had much guidance from my accountant and need to be prepared with a plan. This will be my first year on ACA. Thanks again
Amy says
Ok, so I am being told that if you didnt have insurance and you are over the federal poverty line than there is still a way for the insurance to be considered unaffordable. I was told that if you take your income and mulitply it by the percentage set by the IRS which I think I was told was 8.16% (this changes every year) this is the amount to go by. If the cost of insurance is over that amount than it technically is considered unaffordable and you can take the exception A to not pay the fine. Any clarification on this and if this is actually correct?
Harry Sit says
The gist of it is true. Here’s more info from healthcare.gov:
https://www.healthcare.gov/exemptions-tool/#/results/2017/details/marketplace-affordability
There are other exemptions as well. This tool by healthcare.gov asks a number of questions to see if you qualify for an exemption:
https://www.healthcare.gov/exemptions-tool/#/
Mario Serrano says
Question
hello
I lose my job on November 2016
I collected 6 months in unemployment in 2017….19 K
I withdrawal 75 K from my 401K ( 30% penalty) to pay my condo and car….54K
I apply for credits in market place ..health connector MA
I started collecting my work pension in August 2017 ..$1850 monthly
I started doing my income tax and shows that I need to repay $1600 from health insurance
How can clarify to the IRS that the $75k was used to pay my condo and car leaving me with barely $1000.00 and still in low income (single)
Thank you
FinancialDave says
Mario,
What I see (from way far away) is you spent $82,000 on “stuff” last year ($19k +$54k + $9k) so I don’t see how you are going to get into any low income bracket.
Anyway it doesn’t really matter how much you spent or have, it’s the taxable income number that makes the difference. Even unemployment is income and obviously the $75k withdrawn (less the 10% penalty – rest was regular income tax) is also taxable income used to pay your living expenses, along with the $9k in pension. Therefore your taxable income is something like $95,000, just on the surface given what you have said.
Kim says
Thank you for your really helpful article! I have been unemployed/under employed for all of 2017, earning a grand total of $18,208 for the year. In addition to that, I received $5,395 in ACA subsidies for 2017 (per my 1095A form). I also decided to roll my 401k IRA over into a Roth IRA in 2017 because I saw that I’d be in the lowest tax bracket and wanted the taxes due to be as low as possible. That rollover amount was $28,244. After the rollover, I took and early disbursement ( I am only 54) in the amount of $17,930. In preparing my own taxes for 2017, the rollover amount of $28,244 is showing as income and incorrectly inflating my AGI, which is triggering a total repayment of all of the ACA subsidy. Per your article, my MAGI number is based on $47,520 ($11,880 x 400%), right? And currently, the 1040 form that I’m working on shows my AGI as $46,472. What do recommend I do, so that I am able to keep my ACA subsidy (because I truly had a low income year) and also properly include the rollover amount (which is taxable because it went from a tax deferred IRA to a taxable Roth IRA)? Any help you can offer would be much appreciated!
FinancialDave says
Kim,
Please clarify — “I also decided to roll my 401k IRA over into a Roth IRA in 2017 because I saw that I’d be in the lowest tax bracket and wanted the taxes due to be as low as possible. ”
If you truly did move your traditional 401k (not Roth 401k) into a Roth IRA in 2017 that is a taxable event. You should have by now gotten (or can get on-line) your 1099-R for this rollover — if so what is the distribution code in box 7?
Dave
Harry Sit says
Rolling over a Traditional account to Roth is taxable, which correctly increased your AGI. Yes the MAGI limit for a single person in lower 48 for 2017 coverage is $47,520. If your $46,472 AGI triggers a total repayment you must have something else that put your MAGI over the limit. To reduce your MAGI, see if you are eligible for a deductible contribution to a Traditional IRA for 2017 or a contribution to HSA. If so, make such contribution before April 15.
Kim Tanzer says
Hi Dave. Yes, I received (2) 1099-Gs.
One is for the actual roll-over of $28,244 and the code is: G.
The second 1099-G is for early distribution of $17,929 and that is code: J.
FYI – I used the $17,929 to purchase a used RV, which is now my primary residence ( I mention that in case it can be leveraged in any way to help my situation.) Thanks for your speedy response.
Show quoted text
Rick Brown says
I work only part time…but I have the availability to contribute to a 403(b). Will this reduce my MAGI?
Alan Drake says
Dear Rick,
I assume that you do not need to worry about any upper income limitations for retirement contributions.
Contributing to a 403b now will reduce your 2018 AGI.
If you contribute to a Traditional IRA before April 15, 2018, you can designate whether it will reduce your 2017 AGI or 2018 AGI (assuming you had earned income in 2017).
The upper limits of retirement contributions vary depending on your circumstances. Lower of earned income (minus 403b contribution) or $5,500 if you are under age 55. $6,500 if 55 to 70.5.
Alan
Michael says
I’m 65 and seeking assistance via SSA Extra Help with costs of Medicare Part D Perscription Drug Plan(s). Just spoke with a SSA rep who quoted the 2018 FPL for a H.H. size of 1 person to be $12,140.00 as opposed to the $12,060.00 listed in the table above.
It’s a slight difference but could make the difference to someone right on the margin, depending on which amount is used.
Turns out I’m not qualified but perhaps someone from staff at Finance Buff could inquire of SSA which is correct .
Harry Sit says
This post is specifically for Affordable Care Act, not for Medicare or Medicaid. Affordable Care Act uses the FPL with one-year lag. The 2018 FPL is used for 2019 coverage. Therefore you see $12,060 listed under 2018 coverage and $12,140 listed under 2019 coverage. I don’t know how Medicare or Medicaid does it.
Nina says
It’s wonderful that there are some financially secure people asking financial questions which honestly is helpful. I must ask, it’s showing 12,060 as the FPL for 2018 so I have 12.546 a yr as income my question is after rent electric and my scripts there is nothing left. I don’t get a tax break for having to pay for my insurance. What do I do or did I miss something?
calwatch says
You have to buy insurance on the marketplace, or claim Medicaid if you are in an eligible state. The credits only apply to health insurance on the marketplace, not employer sponsored healthcare or other individual plans. Many employers charge an arm and a leg for poor (60% minimum value coverage) plans but otherwise make you ineligible. In your situation, that might be a high deductible health plan charging $95 a month, below the 9.5% threshold. It is worthless to you but still “counts” as employer provided insurance. https://www.healthcare.gov/have-job-based-coverage/change-to-marketplace-plan/
M Taylor says
Annual Household Income for our family of five is $79,000. Four members are covered under Employer Covered Healthcare, but one is not – so we are applying for CoveredCA for that person. Will that one person be eligible for for Premium Assistance to help with the monthly health insurance payment? Looks like our family’s household income is about 280% of FPL.
Harry Sit says
Unfortunately no. You can use the “Shop and Compare” section on coveredca.com to verify. Why is this person in the household not able to be covered under the employer plan as the other four?
M Taylor says
I am covered under my employer. It is $500/month to cover my RDP. Not affordable. The other three are children covered under their father’s employer.
We updated CoveredCA with new income (she was eligible before with less income and one less dependent), and it states “Household Income IS in the APTC program Limits”. But it is “under review” because there was a qualifying event, so I cannot see the Premium Tax Credit amount.
Charts online show a family of “four” receives APTC if income is <$97K. We are a family of five and earn less than that. Why would we lose the Premium Tax Credit? Thoughts?
Harry Sit says
Because that household of four have to cover four people with that income and you only need to cover one. RDPs still file separate federal income tax returns, right? See if she can qualify with income from her own federal income tax return as a separate household.
M Taylor says
Oh, I understand.
Yes, we file separate federal returns. When completing the CoveredCA application online, the income (line 37) was split $35K each. (The additional $10K was for an adult dependent child who works PT). That said, I am hoping they take her line 37 and she receives a PTC on that income alone.
(I am guessing that is how it was calculated when we applied previously and she qualified for a decent PTC. The income for 2017 was only $5K less (each).
BTW… I’m so grateful I stumbled upon your site. You have been incredibly helpful!
Harry Sit says
The “household” in the application corresponds to each federal income tax return, not people living under one roof. Two single people living together are two households in the eyes of ACA. So just apply separately. You won’t be able to split like this if you marry though. Married filing separately don’t get premium tax credit unless under special situations (separated, domestic abuse, …).
Mario Serrano says
I was 54 yo in November when I lose my job, in January 22 after I was 55 yo and have some money withdrawal from my company 401k … I will have to pay a 10% penalty next year besides the already taxes paid?
Thanks
Mister K says
When you referred to the states that expanded Medicaid, you stated that the minimum income is 138% of FPL; 138% of FPL is the MAXIMUM income, not the minimum.
Harry Sit says
The minimum to qualify for health insurance from ACA marketplace.
Mister K says
The minimum income rule applies only to the APTC with ACA Marketplace plans.
In states that have expanded Medicaid, a person qualifes for Medicaid if one earns UP TO 138 percent of the FPL. For a single individual in 2017, the upper income limit for Medicaid eligibility was $16,642, and for a family of four, the upper income limit was $33,948.
Source: https://www.healthinsurance.org/faqs/my-eligibility-for-medicaid-depends-on-whether-im-133-percent-of-the-federal-poverty-level-can-you-spell-out-what-that-means-in-dollars/
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Harry Sit says
That’s what this whole article is about. Look at the title.
Mario Serrano says
Situation
I was 54 years old in November when I was terminated from my job, in January at 55 years old I withdrawal like 15 K from my company savings 401k …
Question
Do I will pay the 10% penalty next year?. Or the 55 rule apply?
Thanks
Harry Sit says
You will pay the 10% penalty unless you turned 55 by December 31. See Age 55 No-Penalty Withdrawals From 401k Plan.
Melanie says
I see where you have answered that you do not have to pay back subsidies if you fall below poverty level for your 2017 taxes (I’m barely below.) But do you know what that means for qualifying for 2018 subsidies? Will I still qualify if I believe my income will be better or will I be taken off ACA and subsidies without proof? (Obviously, I’m already in ACA and claimed my income would be better, but I didn’t know that I was below poverty in 2017 until now.)
Rob says
What happens if you are over by a small amount on the ACA, do you have to pay all the subsidies back, or just what you are over?
Harry Sit says
If your MAGI is over 400% FPL, you are not eligible for the premium tax credit. If you received advance credit, you will have to pay all of it back when you file your taxes.
Rob says
What if you qualify for tax credit, but maybe a smaller amount than you are receiving, at end of year, if your income is little higher and you still qualify for a credit, but got to much credit, do you pay back all it or the difference?
Harry Sit says
You pay back the difference. At some low income levels there is a cap on the difference you have to pay back.
Margie says
Hi and thanks for this article. I work for myself and make some income off of investments (that are taxable). Last year (2017) – I unexpectedly made way more money that I thought I would in my business – and I also made more than I thought I would in capital gains and dividends – so I went over the Obamacare “cliff” (only by a few thousand $$). Ugh. I paid a HUGE tax bill because of it (and yes, I did all the tricks to reduce my MAGI – by contributing to my HSA and IRA). I doubt I will make that much money in 2018. I just saw my state’s health care exchange has me down as “pending” for whether or not I am eligible to sign up again (I am on Obamacare currently). Does going “over the cliff” once disqualify you for Obamacare going forward?! I’m terrified. That wouldn’t seem right as my income can vary wildly from year to year. Thanks for your help!
Harry Sit says
It doesn’t disqualify you. You just pay more when you don’t get a subsidy. By the way since your work for yourself, did you contribute to a SEP-IRA? That would’ve reduced your MAGI. It can be useful if you ever make more money again.
Margie says
Hi Harry. Thanks so much for your VERY quick response! I was seriously having a panic attack (not kidding)! There was some reason why we (myself and my accountant) didn’t do a SEP-IRA. But, I can’t remember what it was. Actually, this year if I get that close again, I am just going to invest in a new work computer and printer (which I could use). Thanks again, really appreciate it!
Bill Bright says
Household of two, my wife and I, have a projected adjusted gross of $58,700 based on my self-employment. However my wife just started receiving social security. She also qualified for disability. Between the two that is about $500 month. In addition she received a surprise disability check for $7700 backpay, a one time occurrence. Completely unexpected. Between that check and what will be about 5 months of her monthly payments we’re looking at about $10,200 over my adjusted gross. Is this pushing us over the cliff? That is absolutely frightening as we were receiving about a $2200 mo subsidy.
Harry Sit says
When you are at risk of going over the cliff, look for all opportunities to defer income: suspend Social Security retirement benefit, contribute to traditional 401k and IRA (including SEP-IRA for self-employed), contribute to HSA if the health insurance is HSA eligible.
Carl Eberspacher says
What is the current income level max, for a family of 4, to qualify for the whole subsidy with Obamacare?? I was told it was either $98000 or $100,400. Quoted $93.50 per month as long as keep my AGI below about 100K – insuring only 3 since one of our adopted children is covered by Medicaid until age 19. Does this sound correct???
Carl Eberspacher says
I think I was told correct. At $98,000 AGI with my wife and 2 dependent children I would receive $2426 per month subsidy to get the bronze plan for only $93.50 out of pocket cost. Even with one already covered by Medicaid from adoption.
Got this from the healthcare.gov website. Not sure I still get it since one part of the site showed only a $8000 annual subsidy. Is this because it is a tax credit or something??? Is Nebraska coming out better than most other states. It all looks to good to be true.
Never thought I would be able to find something for us late in life adopters that was this affordable. This may my wife’s ticket out of her stressful job and more time for golf and fun with her husband. My business pays well after 30+ yrs and will probably be just under the income limit. I can use def comp and sep contributions to keep us out of the higher limits.
Now my only pickle is possibly losing a dependent before medicare age. My children are 9 and 10 so in about 10yrs it may get sticky. I turn 55 in April so really shouldn’t be a concern. I was also told that any income above $100,400 in 2019 goes basically right to these premiums up to about $30,000. Just need to keep the AGI pretty low.
Do the #’s sound correct????
Thanks is advance!!!
Kay says
I need help: when calculating MAGI to determine marketplace eligibility, does the standard deduction lower the MAGI? I read somewhere that it is calculated differently with respect to marketplace. I’m trying to determine if I should take deductions or not because I don’t want to risk lowering my AGI/MAGI such that I fall under the eligibility income.
If it makes a difference, I am in NC (so Medicaid is not an option.)
Also, I am self-employed.
…Or, am I required to take deduction?
I’m finishing my 2017 taxes now ( got an extension) , so I’m hoping for a reply as soon as possible!
Thanks in advance.
Harry Sit says
It doesn’t. However, adjustments do (traditional deductible IRA contributions, HSA contributions, 1/2 of self-employment tax, etc.).
Linda says
Does my son’s income combine with mine for MAGI he’s turning 19 in nov and made 6000.00
Does a 401k qualify as “above the line deductions”? So if your income is say 40k and you put in 2k into a 401k or Ira it will be deducted from your MAGI?
I am worried I made about 5k over what stated. I also read you only have to pay back max iof 600.00 help!
Harry Sit says
“Income is counted for you, your spouse, and everyone you’ll claim as a tax dependent on your federal tax return (if the dependents are required to file).”
https://www.healthcare.gov/income-and-household-information/
Contribution to a traditional/pre-tax 401k reduces your W-2 gross income. It technically isn’t an “above-the-line deduction” but it still reduces your MAGI. Contribution to a traditional IRA also reduces your MAGI if you are eligible for a deduction for such contribution (see income limits).
Linda says
Also one more thing
Is a Roth IRA considered traditional
Harry Sit says
No. Contributing to a Roth IRA does not reduce your MAGI.
Linda says
Your 401k contributions don’t get added into my income on my w-2 from what I read so if I deduct more out of my paycheck would that help keep my income lower or does it not work like that?
Also my son is a full time student, almost 19 made 6k this year
Harry Sit says
Only if you choose the traditional/pre-tax option, not the Roth option in 401k (some employers offer both options). See reply to comment #86.
CE in Omaha says
What is the current income level max, for a family of 4, to qualify for the whole subsidy with Obamacare?? I was told it was either $98000 or $100,400. Quoted $93.50 per month as long as keep my AGI below about 100K – insuring only 3 since one of our adopted children is covered by Medicaid until age 19. Does this sound correct??
Bobby C says
For determining MAGI, how is student loan interest deducted? Is it the same as federal taxes with a $2500 yearly maximum? FWIW, my 2018 student loan interest paid was close to $10,000. I work full time, have 2 kids and a low income. I was eligible for Medicaid in 2017 while self employed when my business died. I took a job in late 2017 and stayed on. For awhile they required quarterly earnings statements and moved me (wrongly, I believe, because they never asked about deductions at all) to Transitional Medical Assistance Medicaid for a 6 Month maximum. Then when I did my yearly re-application I included my base pay and my student loan interest. They moved me to regular Medicaid and haven’t asked since. I’m trying to stay on Medicaid because it’s the only practical solution. I would have to spend around $6000 more without it. Also, do you see any issues with adjusting 401(k) or IRA contributions, if needed, in order to stay below the Medicaid income line? I think I am right under 138% right now after $2500 student loan deduction and small 401(k). I had mandatory overtime and bonuses during the last quarter and increased my 401(k) contributions significantly to lower my AGI. I wonder if they would count all the student loan interest on the monthly or yearly income eligibility. I wish I made much more money but this is reality.
Harry Sit says
For ACA, as far as student loan interest is concerned, the MAGI calculation is the same as AGI calculation, where only up to $2,500 in student loan interest is deducted from income. In a state that expanded Medicaid to 138% FPL, if your MAGI is under 138% FPL you qualify for Medicaid. If it’s over, the state may have additional ways to qualify you. You will have to ask the state agency. No issues with adjusting 401(k) or IRA contributions, if needed, in order to stay below the Medicaid income line.
Alan Drake says
I am not sure if the IRS MAGI is exactly what is used for other programs. It is for ACA I know.
For Medicaid, they MIGHT count all student loan payments, not just interest.
The IRS phases out the student loan deduction $70.000 to $85,000 this year, and only $2,500 can be deducted from income for AGI.
I also used an HSA to reduce AGI (I am in good health) which then increased my ACA subsidy and kept me below 400% of FPL ; the “ACA cliff”.
Peter says
How would a one time long-term capital gain affect the subsidy I receive in the current year, and my income estimate? The details: I’m single, self employed and on an Obamacare plan in a non-medicaid-expansion state, and my AGI is pretty consistent around $15k/year and I get a healthy subsidy for my health plan.
Now the catch, I also have a market investment (not IRA) that has been slowly growing over the past many years, and has about $40k in net profit. I am thinking of selling it all later this year, but have no specific timing yet, and maybe I won’t even end up selling this year, but the next. But when I do sell, I assume that the profit as income would push my AGI for that year over the subsidy cliff.
Once I do sell it during a given year, say in June, must I then report that profit to the health exchange as an amended annual income estimate, and lose my subsidy and CSR going forward that year? Or do you not have to report a stock sale this way? Or say I sell it Dec. 30, after all the year’s premium subsidy payments have been already paid, would I then simply owe back my whole subsidy for that year, without it affecting the upcoming year’s income estimate (or would it trigger that income disparity warning)? Or would you recommend judiciously taking out only enough profit to keep within some annual AGI threshold to keep some subsidy?
After selling, I’d then again have a $15k income estimate going forward.
Alan Drake says
I would consider selling your investment over at least two years. If you keep your MAGI under 400% of the Federal Poverty Level $(48,560 this year) then you pay a maximum penalty of $1,300 (2018) in subsidies back – not all the ACA subsidy. Go one dollar over that, and you pay ALL the ACA subsidy back !
Having an HSA (good idea if you are in good health) allows you to deduct $3,500 from your AGI this year ($4,500 if over age 50 or 55) if you take some of your profits & put them in an HSA.
I did not take any money out of my HSA till I got on Medicare. Now it can pay for a dozen years of Medicare premiums from my HSA if I want to.
Also, note that if you are in the 10% or 12% income tax bracket that long term capital gains are federal tax free 🙂 So stay in the 12% bracket !
Note also, that as self employed, your health care premiums and ACA penalty (see $1,300 above) are deducted from your income.
Harry Sit says
You do have to report income from stock sale. Even if you wait to sell on December 30, if it makes your income go above 400% FPL, you will have to pay back all the advance premium tax credit. So don’t sell it all in one year. Stay under 400% FPL.
Mister K says
The way it was: If the advance credit payments are more than the amount of the premium tax credit you are allowed, you will add all or a portion of the excess advance credit payments made on your behalf to your tax liability by entering it in the ‘Tax and Credits’ section of your tax return. This will result in either a smaller refund or a larger balance due.
Verify this with your accountant or tax attorney.
Alan Drake says
Unfortunately, tax exempt interest is included in income.
See https://www.healthcare.gov/income-and-household-information/income/
However, self employed income allows you to deduct business related expenses such as transportation . I would suggest being as aggressive as possible there.
CW Wong says
Your FPL numbers seem to be a bit off. Can you verify they are correct?
Harry Sit says
The sources are linked. Please note the one year offset. 2019 ACA coverage uses FPL numbers published in 2018. 2020 coverage uses numbers published in 2019.
Mary says
I live in Ohio, a expanded Medicaid state. I am self employed and My husband does not work. Over the last 4 years my AGI from my business and a bit of investment income has consistantly been below 138% of the FPL so we have qualified for Ohio Expanded Medicaid and have been very satisfied with our healthcare. Every two years in November I need to re-apply with Ohio Jobs and Family services and provide my tax return from the previous year in order to be approved for the next 2 years. In 2018 I made substantially more money than in the 4 previous years and we are now over the 138% of FPL that would qualify us. Midway through the year I anticipated this might be a problem and I moved some of my taxable interest accounts into OhioMuniciple Bond funds that were tax excempt because I thought they would not contribute to my AGI. My accountant suggested that I open a SEP account and contribute the max to it but that’s not enough to do the job So I plan on converting my 2018 Roth to an traditional IRA. Between the two of these I can reduce my AGI enough to qualify for Ohio Expanded medicaid. Am I right so far in what I am doing? Finally, I am concerned that my non-taxable income from the mini bonds will be calculated into my AGI and take me over the income limit again. I know this the case with subsidies for the marketplace but is it also the case for determining eligibility for Ohio Expanded Medicaid? Please advise.
Harry Sit says
In terms of reducing your MAGI, yes, recharacterizing a Roth IRA contribution as a Traditional IRA contribution will help if you qualify for a deduction for contributing to a Traditional IRA. Ohio appears to use the same MAGI definition as federal ACA for its Medicaid qualification.
https://www.medicaid.ohio.gov/INITIATIVES/Modernizing-Eligibility/Frequently-Asked-Questions#3.1
Mary says
Thank you for the info and the link. Very helpful. Since I am self employed I am never certain of my income for the year until my tax return is prepared in March. If for some reason you make more money one year than the allowed amount to qualify for Ohio Expanded Medicaid and you don’t report it because you haven’t received your tax return what are the limits of penalty and payback involved? Theoretically I could be on Medicare for all of 2018 and the first 3 months of 2019 and not qualify. I know once reported you have 60 days to apply to the marketplace. How soon are you cancelled and most importantly are you required to payback premiums of some type and /or the cost of the medical care you received during that year? Best and worst case scenario? THANK YOU!
Alan Drake says
Medicaid is administered by the states but under federal guidelines. So all states are similar but not exactly the same.
I was under Medicaid in Kentucky for two years while caring for my elderly father. Unless there is fraud, there is no “claw back” provision (unless Trump recently added one, see proposed $1 trillion cuts to Medicare & Medicaid). Your case is clearly not fraud.
Under ACA, past year’s income is a guide but not an absolute prediction of future income. When I moved to Kentucky to care for my father, my prior income was far too high to qualify for Medicaid. So I had to write a letter explaining the change in income going forward. After a month, the letter was accepted.
You could explain that your income was unusually high last year (give Income from several years before 2018 to show this) and why you expect your 2019 Income to be lower. This would work in Kentucky.
Kathy says
In applying for market place insurance for the upcoming 2020 yr. in the State of NC what is the minimum amount of yearly income you can make as a single person and still qualify for MPI?
Lisa says
I have the same question that Kathy asked above, but regarding Texas. Like NC, Texas is also a state that has not adopted the Medicaid expansion.
In applying for market place insurance for 2020 what is the MINIMUM yearly income you can make as a single person and still qualify for a subsidy under the Affordable Care Act?
Harry Sit says
In states that haven’t expanded Medicaid, the minimum income to qualify for the premium tax credit is 100% FPL. For 2020 coverage, it’s $12,490 for a household of one person, $16,910 for a household of two persons, etc. This is shown on this web page on healthcare.gov:
https://www.healthcare.gov/lower-costs/
Choose the number of people in your household and your state. The income ranges will show in the dropdown.
John says
Harry,
1) My work had an option for deferred compensation. So I opted for it. The deferred compensation would technically pay starting at age 50. I might not stick there till 50 so when my employment ends and the deferred compensation is given to me (prior to age 50 in my salary) I assume that would cause me to go above the cliff. Any way to avoid it?
2) Also is unemployment received included when calculating MAGI?
3) I assume rental income is added only after deduction of depreciation and expenses or is all of it excluded since rental is technically passive income?
Harry Sit says
1) When the deferred comp is added to your W-2, it becomes part of your income. No way to avoid it.
2) You get a 1099 for the unemployment benefits. It’s also part of your income.
3) Rental income after depreciation, expenses, and any previous loss carryovers is also included as part of your income. Passive income is still income.
Basically anything you can think of as income is part of MAGI. MAGI includes more things than normal AGI, not less.