What Income Counts for Affordable Care Act (ACA) Health Insurance?

The Affordable Care Act (ACA), also known as ObamaCare, provides health insurance subsidies and eligibility to individuals and families who meet certain income requirements. When determining your ACA eligibility, it’s important to understand what types of income count towards these limits.

Income Considerations for ACA

The ACA considers various sources of income when determining your eligibility for health insurance subsidies and Medicaid expansion. These sources include:

– Wages, salaries, and self-employment income
– Interest and dividends
– Capital gains and losses
– Rental income
– Alimony and child support payments
– IRA and 401(k) distributions

In some cases, income from certain sources may not be counted towards ACA limits. These exemptions include:

– Gifts and inheritances
– Certain types of scholarships and grants
– Housing allowance for clergy
– Income earned outside of the United States

401(k) Withdrawals and ACA Eligibility

In the case of 401(k) withdrawals, the ACA treats distributions differently based on the type of withdrawal.

– Early withdrawals (before age 59 ½): Early 401(k) withdrawals are typically subject to a 10% penalty tax. The amount of the withdrawal, including the penalty, counts towards your ACA income.
– Qualified withdrawals: Qualified 401(k) withdrawals, such as distributions after age 59 ½ or for certain hardship reasons, are not subject to the 10% penalty tax. However, the amount of the withdrawal still counts towards your ACA income.

Estimating Your Income for ACA Enrollment

When estimating your income for ACA enrollment, you should include all expected sources of income for the entire year, regardless of when you receive them. This includes:

– Current income from employment or self-employment
– Expected unemployment benefits
– Projected 401(k) withdrawals

By accurately estimating your income, you can avoid surprises when it comes to paying premiums or receiving subsidies. If your income changes significantly after you enroll in ACA coverage, you may need to update your information on HealthCare.gov to ensure you continue to receive the correct amount of financial assistance.

Conclusion

Understanding what income counts towards ACA limits is crucial for determining your eligibility for health insurance subsidies and Medicaid expansion. By considering all sources of income, including 401(k) withdrawals, you can accurately estimate your income and make informed decisions about your health insurance coverage. If you have any questions or need assistance, it’s recommended to consult with a licensed insurance agent who specializes in health insurance.