If you are trying to determine if you are eligible for a premium tax credit under the Affordable Care Act, you’ll need to provide your expected income for the year. This is easier for some people than it is for others. Today, we’re going to review the three steps you need to follow to estimate your expected income for Obamacare and discuss some of the common questions people have when completing this process.
Estimate Your Expected Income in 3 Steps
Individuals who have a small household and predictable income should be able to navigate this process quickly.
● Step 1: Find your household’s adjusted gross income (AGI) on your most recent tax return.
● Step 2: Add any tax-exempt foreign income, Social Security benefits or tier one railroad retirement benefits, and any interest income.
● Step 3: Adjust that number to include any changes you are expecting in the current year.
You’re done! Unfortunately, we know it isn’t quite that simple for everyone, and many people get caught on the very first step. Let’s go into more detail about calculating your adjusted gross income for Obamacare.
Finding Your Adjusted Gross Income
What if you don’t know your AGI? If this is the first time you’re filing taxes, or you simply can’t find your last return, there are other ways you can calculate your AGI.
First, locate your most recent pay stub. Search for a line item or box that says “federal taxable wages.” If they don’t provide that number, you’ll need to find your gross income before taxes. Subtract any amounts that are deducted for health insurance, retirement, and child care to get your taxable wages.
Next, multiply your taxable wages by the number of paychecks you will receive that year. The number you get is your estimated income, and you can use this number as your AGI. Remember, you’ll need to include everyone in your household in your total household income, so repeat this process for each income earner in your house.
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Most people’s next question is who gets included in their “household.” The simple answer is: the tax filer, spouse, and all tax dependents. You should consider any changes that may happen within the year, like a child turning 18 and filing their own taxes. If you won’t claim a dependent on that year’s tax filing, don’t include them in your expected income. Only include a spouse if you are legally married.
You must include all household members, regardless of if they need insurance or not. Affordable Care Act subsidies are based on the entire household income, not just those who need health insurance. You’ll include household members who have an employer-sponsored plan, an individually-purchased plan, or who are enrolled in Medicare, Medicaid, or CHIP. (CHIP stands for Children’s Health Insurance Program.)
Not everyone has a predictable income. Individuals who are self-employed or work on a commission basis might have a much hard time estimating their income.
You’ll need to use past experiences and recent trends and consider changes that might take place over the year. If you’re new to the job, ask coworkers or other people in the same industry about their experience if they’re willing to share information. If you are able to deductible expenses from your gross income, use your expenses from the previous year as a starting point.
What do you do if you’re unemployed? Is your expected income $0? Maybe, but make sure to include other sources of income you might have, including unemployment compensation from your state. You will also include income from interest, capital gains, and alimony. You should also include withdrawals from 401(k)s and traditional IRAs.
Updating Your Expected Income
It’s important to go online and update your expected income throughout the year. If you get a raise, change jobs, or have higher or lower income for any other reason, you should update your income as soon as possible. Keep in mind that gaining or losing a household member will also change your household income, so you should update your number in that situation as well.
The reason it’s important to update your expected income is that you could be eligible for more savings, or you could owe money at the end of the year.
If your expected income decreases, you might qualify for a higher subsidy, which would lower your monthly premiums. Or, you could qualify for coverage through Medicaid or CHIP. If your expected income increases, you might qualify for a lower subsidy. If you don’t report the change until the end of the year, you’ll have to pay back the money when you file your federal tax return.
If you need help estimating your income for Obamacare, call CoverMile. We can help you calculate your income and also enroll in either Obamacare or another form of health insurance in Texas. Our services come at no additional cost to you, so don’t hesitate to reach out. Our licensed insurance agents are happy to help!
FAQs
What is the modified adjusted gross income?
Your modified adjusted gross income, or MAGI, is a number very similar to your adjusted gross income (AGI). Since MAGI is not a number on your federal tax return, it is easier to use your AGI.
How do I figure out my annual income?
Multiply your hourly rate by the number of hours you work each week. Multiply that number by 52 (the number of weeks in a year), and the answer will be your annual salary.
How do I update my expected income for Obamacare?
You can update your expected income by logging into your online account, contacting the Marketplace call center, or speaking with a licensed insurance agent who works with Marketplace insurance.
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