What counts as household income under ACA for families?
Executive summary
Household income for ACA purposes is calculated using the Affordable Care Act version of Modified Adjusted Gross Income (MAGI), which starts with a household’s federal adjusted gross income (AGI) and then adds back certain non‑taxable items while excluding others — and the Marketplace uses that projected MAGI and household size to determine subsidy eligibility [1] [2] [3]. Who belongs to the household for this calculation is not everyone under one roof but generally the taxpayer, a spouse if filing jointly, and any tax dependents [4] [5].
1. What “income” means: MAGI is the yardstick, not total cash flow
For premium tax credits and most Medicaid/CHIP determinations the Marketplace and state agencies use ACA‑specific MAGI, meaning applicants should begin with their federal AGI from Form 1040 and then add back certain non‑taxable items that the ACA requires to be counted, producing the income figure that sets subsidy eligibility [1] [2].
2. Common items that get counted in MAGI
Counted items typically include wages and salaries, self‑employment income, unemployment compensation, taxable Social Security and retirement income, tax‑exempt interest, and certain foreign income additions specified for ACA MAGI — in short, many sources of cash and investment income that affect AGI and certain non‑taxable items are included in the ACA MAGI calculation [1] [6] [2].
3. Non‑taxable receipts that are explicitly added back
The ACA MAGI adds some non‑taxable items that taxpayers might otherwise overlook: non‑taxable Social Security benefits (including SSDI, though Supplemental Security Income is excluded), tax‑exempt interest income (such as municipal bond interest), and some foreign‑earned income/housing exclusions — these additions can raise MAGI even if they were not taxed on a federal return [6] [2].
4. Clear exclusions: what does not count
Certain payments are explicitly excluded from ACA MAGI: Supplemental Security Income (SSI), Veterans’ disability benefits, workers’ compensation, child support, gifts and inheritances, and many public assistance payments like TANF — these are not treated as MAGI and therefore do not count toward the household income used for subsidies [2] [7].
5. Employer pre‑tax deductions and timing quirks
Pre‑tax deductions that reduce federal taxable wages — such as employer‑sponsored health premiums, retirement contributions, or flexible spending account amounts — generally lower AGI and thus lower MAGI for Marketplace purposes; HealthCare.gov tells applicants to use “federal taxable wages” or gross pay less pre‑tax amounts when estimating income from pay stubs [8] [7]. Lump‑sum receipts may be treated differently by Medicaid versus the Marketplace: Medicaid sometimes counts lump sums only in the month received, while Marketplace subsidy calculations typically annualize income unless special rules apply [6] [7].
6. Who to include in household income: tax relationships matter
Household size for ACA income calculations follows tax household rules: include oneself, a spouse if filing jointly, and anyone the taxpayer will claim as a dependent; if someone is claimed as a dependent by another taxpayer, that person’s income is included on the claimant’s application, not their own separate application [4] [5]. Marital and tax‑filing choices (married filing jointly vs. separately, head of household) change both who’s in the MAGI household and eligibility for credits [4] [5].
7. Why it matters: thresholds and policy exceptions
The resulting MAGI is compared to Federal Poverty Level percentages to determine premium tax credit eligibility and amount; traditionally that meant being between 100% and 400% of FPL for the premium tax credit (with temporary exceptions in some years), though policy changes and benchmarking rules have altered subsidy calculations and thresholds in recent years, so applicants should check current IRS and Marketplace guidance [3] [9].