It might seem hard to predict what your income will be before the year is finished. But if you want to apply for government dollars to help pay for your health insurance, you'll need to do just that.
Here are some things to keep in mind:
1. You should estimate your income for the same year you want the insurance. For example, if you're buying insurance for 2015, you should enter your expected household income for 2015. If your circumstances don't change much from year to year, your 2015 income will probably be similar to what it was in 2014.
2. Be ready to back up your numbers. If the government asks for more detail, be ready with last year’s tax return, a W-2, a 1099, or a current paycheck stub.
3. Your household income should include income from everyone in the household. Yes, everyone in your household — that means anyone who’s a dependent on your tax form, even if those people aren’t buying health insurance with you now. If you have a spouse and you file your taxes jointly, include your spouse's income (even if your spouse gets health insurance from work). If you have a dependent child and he or she earns income, include that too. (Need more info? Get a refresher about who’s in your household.)
4. Income can be more than simply what you earn at work. Here's a list of what to include in your estimated income:
- Income from jobs (wages, salaries, tips, etc.)
- Self-employment income
- Interest and dividends
- Pension or IRA distributions
- Social security or disability payments (includes Social Security Disability Insurance payments, but not Supplemental Security Income)
- Unemployment compensation
- Alimony received
- Income from rental property
- Taxable refunds of state and local income taxes
5. Some of the money that comes your way doesn't need to be included in your estimate. When tallying your income, don't include:
- Gifts received
- Proceeds from loans (student loans, home equity loans, or bank loans)
- Child support received
- Supplemental Security Income
6. Don't guess. If you're at all uncertain about what your income is, or if you're confused by this list of what to include or not include, get help. Consult a tax expert or accountant.
7. And don't fudge, either. You might be tempted to "game" the system by entering a number other than your real household income. Don't do it. First of all, it's illegal to intentionally enter information you know is wrong. Second, your income is going to get formally verified. The government will compare your projection with other official records from, say, the IRS or the Social Security Administration. If your projection is wildly different from what you earned last year, you'll have to provide documentation to explain your reasoning. Third, if your actual income turns out to be much higher than you project and you end up with more government help than you really qualified for, you'll have to pay the government back. That's a surprise no one wants.
NOTE: This information isn't intended to be tax advice. Please visit the IRS's website for a more detailed description of MAGI.