If you are looking to apply for the marketplace health plan, then you will need to correctly estimate your annual income because you need to provide your annual income while applying for a health plan. If you are the one who is looking for a health plan after being laid off or after getting your working hours reduced, then it becomes difficult to estimate the income. Now let us discuss some significant facts on annual income and how it is estimated.
Why Annual Household Income is Required for Applying for Marketplace Heath Plan
The best thing about the Affordable Care Act available through the Marketplace is the special saving program in the form of premium tax credits. The premium tax credit is the saving program that makes the plan affordable and you can become eligible for this tax credit based on your expected household income for the upcoming year and not based on the past year’s income. To find out the cost savings that are available to you for marketplace plans, you will need to correctly estimate your annual household income for the year in which you are applying for the coverage. This becomes extremely difficult if you have been laid off and you are not sure when you will get a new job.
What is Included in the Household Income Calculation
Your Medicaid eligibility is based on your monthly income, but at the time of shopping for a marketplace plan, your eligibility for tax credit depends upon your annual income. Thus, if you had a higher-paying job in the first few months of the year and then your working hours were reduced, then there is a chance that you qualify for Medicaid because you have low monthly income despite having a higher annual income.
Who All Are Included in the Household Income
You need to first figure out, who all are part of your household income. You should calculate the combined income of yourself, your spouse, and anyone you claim as a tax dependent on your federal income tax return. You will need to include the income of all even if not all members of your house require coverage through the marketplace, but their income will still count towards your annual household income.
What are Counted as Income?
Find below a comprehensive list of income sources and know whether you count them for estimating marketplace income, Medicaid income, or both. Your marketplace subsidies eligibility depends upon your Modified Adjusted Gross Income, which is your adjusted gross income along with any untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest.
If your income stays the same year over year, then you will need to start with your household’s adjusted gross income from your recent federal income tax return. If you think that your income will change this year, then look at a recent pay stub, where you will find an annotation denoting your federal taxable income. If this is not present on your pay stub, then take your gross income and deduct any with holdings your employer takes out. You will need to either multiple the amount earned per pay period by the number of expected paychecks in the upcoming year. Then you will add in any additional tax-exempt income to the above-mentioned calculated amount. This includes any tax-exempt foreign income, tax-exempt Social Security benefits, and tax-exempt interest. You may also need to consider expected changes in the coming year like gaining or losing a dependent or gaining or losing a job.