For a Marketplace health plan, income means modified adjusted gross income, or MAGI. That figure starts with the adjusted gross income (AGI) on line 11 of your Form 1040 and adds back three things if they apply to you: tax-exempt interest, the non-taxable portion of Social Security benefits, and any foreign income you excluded from tax.1HealthCare.gov. Modified Adjusted Gross Income (MAGI) – Glossary So what is considered income for Marketplace insurance is broader than just your paycheck, but narrower than “every dollar that came in the door.” For most households, MAGI ends up equal or very close to AGI.
One thing to keep straight from the start: the Marketplace wants your projected income for the coverage year, not last year’s tax return.2HealthCare.gov. Low Cost Marketplace Health Care, Qualifying Income Levels If you know a raise, a job change, or a new income source is coming, build it into your estimate now.
Income That Counts Toward MAGI
Wages, Salaries, Tips, and Bonuses
Job earnings are the biggest piece for most people. If your pay stub shows “federal taxable wages,” use that number. If not, start from gross pay and subtract what your employer takes out pre-tax for health premiums, 401(k) or 403(b) contributions, flexible spending accounts, and dependent care benefits.3HealthCare.gov. What’s Included as Income Bonuses, overtime, commissions, and tips all count.
Self-Employment Income
If you work for yourself, report net self-employment income: gross revenue minus allowable business expenses, the same figure that lands on Schedule C.4HealthCare.gov. Reporting Self-Employment Income to the Marketplace All client payments count, whether or not you received a 1099-NEC. A net loss reduces your household MAGI, and a strong year is a reason to update your application right away.
Self-employed people can also deduct health insurance premiums paid for themselves and their family. That deduction sits on Schedule 1, lowers AGI, and therefore lowers the MAGI the Marketplace uses.1HealthCare.gov. Modified Adjusted Gross Income (MAGI) – Glossary
Unemployment Benefits
Unemployment compensation is taxable and fully reportable. Enter the gross amount, before any tax withholding or garnishment, and include state-issued extended benefits and any federal supplemental payments.5HealthCare.gov. Marketplace Coverage When You’re Unemployed
Retirement Distributions and Social Security
Withdrawals from traditional IRAs and traditional 401(k)s are taxable and count in full.6Internal Revenue Service. Traditional and Roth IRAs Pensions, annuities, and required minimum distributions at age 73 or older go in the same bucket.7Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Qualified Roth IRA and Roth 401(k) withdrawals are generally tax-free and stay out of MAGI, provided the account has been open at least five years and you are 59½ or meet another qualifying event.8Internal Revenue Service. Roth Comparison Chart Non-qualified Roth withdrawals can be partially taxable and do count.
Social Security is a common source of confusion. Report Social Security retirement, survivor benefits, and SSDI on your application.9CMS. Reporting Income on a Marketplace Application Even the portion of your benefit that is not taxed on your federal return gets added back for MAGI purposes.1HealthCare.gov. Modified Adjusted Gross Income (MAGI) – Glossary Supplemental Security Income (SSI) is different: it stays off the application entirely.
Investment, Rental, Alimony, and Other Income
Interest, dividends (qualified and non-qualified), and capital gains all flow into MAGI through your AGI. Tax-exempt interest from municipal bonds is added back on top of AGI, so it raises your subsidy-relevant income even though it is not federally taxable.3HealthCare.gov. What’s Included as Income
Rental income is reported net of expenses like maintenance, insurance, depreciation, property taxes, and mortgage interest.10Internal Revenue Service. Publication 527, Residential Rental Property A net rental loss reduces AGI.
Alimony from a divorce or separation agreement finalized before January 1, 2019 is taxable income and must be reported. Alimony under an agreement executed after that date is not taxable to the recipient and is not counted.11Internal Revenue Service. Alimony, Child Support, Court Awards, Damages
Foreign earned income you excluded on Form 2555 is added back for MAGI.12Internal Revenue Service. Modified Adjusted Gross Income Gambling winnings, jury duty pay, and taxable scholarships or fellowships also count.
Income That Does Not Count
The Marketplace specifically leaves these off the MAGI calculation:3HealthCare.gov. What’s Included as Income
- Child support you receive
- Supplemental Security Income (SSI)
- Veterans’ disability payments
- Workers’ compensation payments
- Gifts and inheritances
- Loan proceeds, including student loans and home equity loans
- Child Tax Credit payments from the IRS
- Life insurance death benefits paid to a beneficiary because of the insured’s death13Internal Revenue Service. Life Insurance and Disability Insurance Proceeds
- Alimony from agreements executed after 2018
Including any of these by mistake inflates your MAGI, understates your subsidy, and can leave you paying more for coverage than you should all year.
Deductions That Bring Your MAGI Down
Because MAGI starts with AGI, any above-the-line deduction on Schedule 1 lowers both. You can take these even if you do not itemize:
- Deductible traditional IRA contributions (subject to phase-outs if you or a spouse have a workplace retirement plan)
- Student loan interest, up to $2,500 per year14Internal Revenue Service. Topic No. 456, Student Loan Interest Deduction
- Health Savings Account (HSA) contributions you make directly (employer HSA contributions through payroll already bypass your wages)
- Self-employed health insurance premiums
- Alimony you pay under a pre-2019 agreement
Pre-tax payroll deductions such as 401(k) contributions and employer health premiums do not appear as a separate deduction. Your W-2 already reflects the lower taxable wage, so they quietly hold your MAGI below your gross pay.
Whose Income Goes on the Application
MAGI is a household number. Include your income, your spouse’s income if you file jointly, and the income of anyone you claim as a tax dependent if that dependent is required to file their own return.15HealthCare.gov. How to Estimate Your Expected Income and Count Household Members A teenage dependent with a summer job that clears the filing threshold, or a dependent with meaningful investment income, gets added to the household total even though they may not need coverage themselves.
Why Your Estimate Needs to Be Accurate in 2026
Your subsidy runs on your estimate all year, then gets reconciled against actual income when you file your federal return. Under prior rules, repayment of excess advance premium tax credits was capped based on income. Starting with plan year 2026, those caps are gone. You repay the entire excess, dollar for dollar.16CMS. Are There Limits to How Much Excess Advance Payments of the Premium Tax Credit (APTC) Consumers Must Pay Back A household that underestimates income by $15,000 could owe several thousand dollars at tax time with no cushion.
Report changes as they happen: a new job, a raise, a lost job, a large capital gain, a spouse starting a business.17CMS. Report Life Changes When You Have Marketplace Coverage Updating your application shifts your subsidy in real time and keeps the gap between what you received in advance and what you actually qualify for as small as possible.