Q: I am on Medicare and Social Security, my wife recently became self-employed and needs insurance from the state exchange. How do we figure our household income? Does my social security count toward household income, since I will not be buying insurance, or just my wife’s?
A: For the purpose of determining subsidy eligibility, here’s the formula that’s used to calculate modified adjusted gross income (MAGI). MAGI is based on household income, even if only one spouse is applying for a policy in the exchange.
Keep in mind that subsidy-eligibility is a function of income related to the poverty level. Although your total household income is obviously higher than your wife’s income alone, the poverty level for a household of two is also higher than the poverty level for a household of one. For 2017 coverage, the upper income limit for a household of one to receive subsidies is $47,520. For a household of two, it’s $64,080.
In order to qualify for a subsidy, married applicants must file joint tax returns. If your wife experienced a qualifying event (for example, losing her employer-sponsored plan when she became self-employed), she can enroll in the exchange now. If not, she’ll have access to individual market plans when open enrollment begins on November 1.
Your wife can use your most recently-filed tax return to provide income information to the exchange. But if your household income has changed significantly as a result of her recent self-employment, she can instead provide the exchange with an estimated projection of your household income, and then provide updates to the exchange later on if her income changes again. For any year that she receives advance premium tax credits (subsidies) during the year (or if she pays full price through the exchange but ends up with a household income that makes her subsidy-eligible), she’ll need to use Form 8962 to reconcile her subsidy on your joint tax return.