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What Counts as Income for Insurance Enrollment?

By Lisa ZamoskyNovember 14, 2013
From the WebMD Archives

When applying for an insurance plan through the health insurance Marketplaces set up under the Affordable Care Act, you’ll be asked to project your income for 2014. Your household income is used to determine whether you’re eligible for a tax subsidy or for Medicaid, so it’s a critical piece of information to have.

But just who is considered part of your household and which types of earnings must be counted when adding up your total household income? The details can get confusing, which is probably why these are among the most common questions I receive from readers.

To get some clarity, I spoke with Laurel Lucia, policy analyst at the U.C. Berkeley Labor Center to help sort things out.  Below are some of the most frequently asked questions and answers about income and tax status as they relate to applying for insurance through the Marketplaces.

Q: What exactly is considered a “household”?

A: Any family member included on the same tax return is considered part of the household. That’s the case, “regardless of whether or not all of those household members need coverage,” Lucia says.

Using the example of a husband and wife in which only the husband needs health insurance, the couple could purchase a plan for the husband alone, but must report both spouses’ incomes when filling out the application for coverage.

Q: Do I have to report my husband’s income if as a married couple we file taxes separately?

A: Even if you file taxes separately from your spouse, both of your incomes count when determining whether you qualify for a tax subsidy.

However, Lucia says – and this is important – married couples have to file taxes jointly in order to be eligible for the tax credits. “If they haven’t filed jointly in the past and they want tax credits next year, they can file jointly in 2014 and just let the Exchange know they’re planning to do that,” Lucia says.

Q: Should I include my Social Security income when applying for insurance through the Marketplace?

A: Yes,Social Security benefits must be reported and do count as income when determining if you qualify for a tax subsidy to help cover the cost of health insurance.

Q: Should I add in the widow Veteran benefits I receive?

A: Widow Veteran benefits do not need to be reported as part of your income.

Q: What about Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI)?

A: Social Security Disability Insurance (SSDI) is a benefit you earn by working and paying Social Security taxes; it’s paid to people with physical and/or mental impairments that prevent them from working. SSDI benefits do count toward your total household income.

Supplemental Security Income (SSI) pays benefits based on financial need, and do notcount toward your total household income.

Q: My 21 year old son lives at home and earns about $22,000 per year. We still claim him as a dependent. Do we need to include his earnings as part of our total household income?

A: Yes, Lucia says. Your son’s income would be included because it’s above the tax filing threshold, which is $10,000 for an individual. Anyone making less than $10,000 a year is not required to file taxes.

However, if your son isn’t a dependent, his income would be treated as separate from yours, even if he lives with you. “If family members or unrelated people live together they are treated as separate households if they are not on the same tax return,” Lucia says.

Q: I’m an adult living with my elderly father who collects Social Security. Do I have to include his income when I apply for insurance?

A: No. As long as your father does not list you as a dependent when he files taxes, his Social Security benefits will not reflect on your income.

However, Lucia says, if you claim your father as a dependent, and he earns enough income to file taxes (again, at least $10,000 annually) your dad’s Social Security benefits would count toward your household income.

U.C. Berkeley’s Labor Center has created a very useful guide outlining the types of income calculated under the law. You can find it here.

What confusing details have you run into when applying for insurance through the Marketplace? Share your story and your questions in the comments section below.

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