If you plan to apply for health insurance via the Health Insurance Marketplace, you must have your annual income readily available. Estimating your income can be challenging! One must consider change in working hours, job loss, unemployment compensation… the list goes on!
Our experienced, licensed team at McKnight & McKnight Insurance Solutions can offer these tips on how to calculate your income for when you select a new policy.
Why Do I Need to Know My Annual Income?
Most people select an Affordable Care Act health insurance plan because they are eligible to receive a subsidy toward their monthly premium. However, it’s essential to keep in mind that these premium tax credits are based on your expected household income for the upcoming year — not the past year’s income.
Bottom line — if you want to find out what cost savings (subsidy) may be available to you for different marketplace plans, you will need to estimate your annual household income for the year in which you are applying for healthcare coverage.
If you need help finding a health insurance plan or estimating your subsidy, we are here to help! Our team is committed to making this process as simple as possible. Schedule a phone consultation with an experienced, licensed health insurance agent today.
Who Do I Include in My Household Income?
Before applying, consider who is part of your household. You will need to add up the total combined income for yourself, your spouse, and anyone claimed as a dependent on your federal income tax return. Note that you must include these individuals in your calculations, even if they are not applying for Marketplace coverage.
What Should I Consider when Calculating Income?
Your eligibility for subsidies on the marketplace is based on your Modified Adjusted Gross Income or MAGI. MAGI is your Adjusted Gross Income (AGI) plus:
Untaxed foreign income
Nontaxable Social Security benefits
If your income is stable year-to-year, then you’ll start with your household’s AGI from your most recent tax return. If you don’t have an AGI or you think your pay will be different this year, a recent pay stub will show your “federal taxable income”
If this notation isn’t on your pay stub, subtract your employer’s withholdings from your gross income.
Next, multiply the amount you earn per pay period by the number of paychecks you expect to receive next year.
Finally, add in any additional tax-exempt income and then factor in any changes you expect in the coming year, such as gaining or losing a dependent, or gaining or losing a job.
Don’t wait! Our schedule fills up quickly during the Open Enrollment season. A brief phone call is all it takes to find the best plan for your needs. Schedule your Open Enrollment phone appointment today!
What If My Income Is Unpredictable?
If you are self-employed or unemployed, there may be other factors you need to consider when calculating your annual household income.
If you are unemployed, estimate your income for the next year by calculating your unemployment compensation, all household income, and other income such as capital gains, alimony, withdrawals from traditional IRAs or 401(k)s, or interest income. (This does not include child support payments.)
If you are self-employed, estimate what your pay and expenses will be in the upcoming year. If there are changes to your income throughout the year, make sure to contact us to help you update that information. Your subsidy will then be adjusted for future months.
Handling Overestimates or Underestimates
If you overestimate your income, you will receive tax credits in the form of a tax refund for the amount that you should have been subsidized.
If you underestimate your income, you will owe the government the difference between what you received as a premium tax credit and the amount you should have qualified for based on what you earned.
What Happens if I Start a New Job Next Year?
If you get another job or an offer for health insurance through a new employer, you will most likely be ineligible for cost savings on your marketplace plan. Cost savings will be voided even if you don’t enroll in your job-based health coverage, and you will have to cancel your marketplace plan.
If your new job doesn’t offer health insurance, you will need to report the income change in your marketplace account.
Apply for 2022 Health Coverage
Ready to apply for health coverage but need help estimating your income? Our team at McKnight & McKnight Insurance can help! We will help you evaluate your annual income and find the perfect plan for you.
Call today at (866) 525-0368 to speak to an insurance agent directly or schedule a phone appointment online. In just a few minutes, we can discuss your health insurance options and determine your eligibility for subsidies and tax credits.