As part of a Marketplace application, it’s necessary to estimate your estimated household income. Your household typically comprises you, your spouse (if applicable), any tax dependents who require coverage (even those without health needs).
To calculate your MAGI, the following factors will need to be used.
1. Estimate Your Income for the Year You Want Coverage
Household income refers to all income earned by all members of a household over an annual period. It plays a critical role when purchasing health insurance as it determines eligibility for subsidies that help make coverage affordable, Medicaid eligibility and Children’s Health Insurance Program eligibility (CHIP eligibility), state agency administration of these programs as well as being used by various studies and economic surveys.
For purposes of purchasing health insurance through the Marketplace, it is necessary to estimate your household income for the year you intend to buy coverage. This figure should include wages, salaries and tips earned as wages as well as investment income, retirement benefits from Social Security or unemployment compensation and any cash earnings; it does not take into account non-cash sources of income such as alimony or child support payments.
To determine premium tax credits and other financial assistance from the government, your modified adjusted gross income (MAGI) must first be calculated using your adjusted gross income reported on Form 1040 Line 11 in Step 3. Add back in any tax-exempt foreign income you received as well as future Social Security benefits that you’ll be receiving; for self-employed workers add business and personal deductions into this equation as well.
Predicting your income for an entire year can be challenging if you’re self-employed or have an unpredictable work schedule, but do your best to accurately estimate it for the year when purchasing health insurance through Marketplace. Your estimated income will be verified when submitting the Marketplace application and any changes that occur midway can have a profound effect on savings.
Make sure that all tax dependents, even those not needing health insurance, are included in your household. Also remember to update your Marketplace application as soon as any major life changes take place, such as giving birth, moving locations or getting divorced/legally separated; such events could qualify for special enrollment periods allowing changes outside of Open Enrollment periods.
2. Be Ready to Back Up Your Numbers
Household income, for the purposes of determining eligibility for marketplace health care subsidies, refers to your adjusted gross income (MAGI) plus that of all members in your household who will apply for marketplace coverage – this may include you and/or your spouse, tax dependents claimed on taxes who don’t actually require health insurance from the marketplace – who apply. Your application will request information on all members in your household in order to calculate MAGI accurately.
Household income refers to the total cash earnings for any household – be it a family unit or just one individual living alone. Household income serves as an important indicator of local and national economic health, since it measures how well families can support themselves financially. Along with family and per capita income measures, it’s one of three commonly referenced measures of income.
Household income may be calculated differently by different agencies and organizations depending on your circumstances. When applying for housing assistance, they may use the definition provided by the federal government: “the median monthly rent or mortgage payment plus average weekly expenses of food utilities and fuel”. But when using MAGI calculations to qualify for marketplace health care subsidies you’ll probably require more specific documentation like last year’s tax return W-2 forms paycheck stubs as official proof of income verification documents.
To ensure that you use an accurate definition of household income, it’s essential that you become acquainted with its various methods and nuances of calculation. For instance, some items previously counted by Medicaid as part of household income are now excluded under MAGI rules such as child support received, veterans benefits received, workers’ compensation payments made directly to a worker by an employer, gifts and inheritances as well as certain Temporary Assistance for Needy Families and Supplemental Security Income payments made. You can learn more about how these changes impact MAGI in 2021 Census Bureau reports such as Income in America Poverty in America & Health Insurance Coverage in America
3. Include Everyone in Your Household
Household income refers to the total gross cash income earned by all family members aged 15 or above who reside within one household unit, regardless of how closely related they may be. According to the Census Bureau definition of “all pre-tax income of individuals age 15 and older living together within an unit.”
Researchers and government programs generally refer to “household income” as the total sum of individual incomes combined into one payment. With this measure in hand, the Census Bureau reports on various aspects such as average household income levels, poverty statistics and geographical distribution of wealth.
Definitions of household income depend upon context. For Marketplace applications and premium subsidies, however, when discussing “household income”, “I” typically refers to both the consumer’s own personal income as well as that of his/her spouse (if married) or tax dependent children if unmarried – since health insurance Marketplace applications seek information on all these individuals.
MAGI can vary depending on which studies or government agencies/programs are conducting an analysis, for instance the Congressional Budget Office includes non-cash receipts like food stamps in its estimates of household income while Medicaid used a more restrictive definition that excluded many benefits and receipts that had an indirect impact.
That is why some individuals struggle to accurately determine their household income when applying for health insurance coverage on the Marketplace. To make sure you’ve calculated MAGI accurately, be sure to include all relevant household members’ incomes; for example if your employer provides family coverage you should include both incomes of spouse and any tax dependent children in your calculation.
As part of their affordability assessment in the Marketplace, when calculating affordability for employees the employee share of the lowest cost plan offered by their employer must equal or less than 8.39% of household income to qualify for a subsidy regardless of its suitability for other members of their household.
4. Don’t Forget Dependents
Household income is defined as the sum of all of your Modified Adjusted Gross Incomes (MAGIs), including that of you and any members of your household who file taxes – this can include you as tax filer; spouse (if married); any tax dependents you claim even if they no longer require Marketplace coverage now; as well as adults living in your home or apartment who can file their taxes – such as earnings from work, Social Security benefits, investment income such as interest, dividends etc.
To determine affordability, the Marketplace considers your total household income – this includes all members who may purchase coverage through it – which could include employer coverage as well as tax dependent status (for instance if your husband has employer coverage and you claim him as a dependent). When making their assessment of affordability.
Your family income must be sufficient to qualify for assistance paying Marketplace insurance premiums; financial eligibility is based on annualized income levels.
As such, it’s essential that all sources of family income be included when calculating household income. Doing this also allows you to see whether spending has increased or decreased over time.
Post-tax income refers to money income net of federal and state income and credit payments, payroll taxes including FICA contributions, temporary cash payments administered by tax agencies like rebates or stimulus payments; these programs are included in survey data used to calculate household income so any decline between 2021-2022 was likely due to reduced participation rates in these programs.
Note that the exact number of those without health insurance varies based on factors like how many people report their coverage status, survey methodology and accuracy of information reported. For instance, according to the Census Bureau’s Current Population Survey (CPS), 42 million Americans went without coverage at some point over the past year; this may rise with weakening economies – and CPS only asks about uninsurance on one single day of each year, so may not fully represent trends toward less people going uninsured over longer time spans.
