What Counts as Income for ACA Subsidies in 2026?

Direct Answer: What Counts as Income for ACA Subsidies

Depends on the income source. ACA subsidies use Modified Adjusted Gross Income (MAGI), which counts wages, self-employment income, Social Security benefits, unemployment pay, tax-exempt interest, and capital gains. MAGI excludes SSI, child support, gifts, and pre-tax payroll deductions. The Marketplace totals MAGI for everyone in your tax household required to file, then compares it to the 2025 federal poverty guidelines used for 2026 coverage. Income above 400% of the federal poverty level gets no premium tax credit in 2026.

What Counts as Income: The 2026 MAGI Formula

MAGI starts with adjusted gross income (AGI), the number on Form 1040 line 11, and adds back three items: tax-exempt interest, non-taxable Social Security benefits, and excluded foreign earned income. For most households filing a simple return, MAGI and AGI end up close to the same number because the add-backs are small or zero. For 2026 ACA subsidy purposes, the following all count as income:

• Wages, salaries, tips, and bonuses reported on a W-2, before any pre-tax deductions are removed by an employer.
• Net self-employment or 1099 / gig income, meaning revenue minus deductible business expenses (Schedule C or Schedule SE net earnings).
• Social Security retirement, disability (SSDI), and survivor benefits, counted in full even though only part may be taxable.
• Unemployment compensation paid by a state agency.
• Interest and dividends, including tax-exempt municipal bond interest that is added back for MAGI even though it is not taxed.
• Capital gains from selling stock, a second home, or other investment property.
• Rental income and the taxable portion of pensions, annuities, and retirement account withdrawals.
• Alimony received, but only for divorce agreements finalized before January 1, 2019.

What Does NOT Count as Income for ACA Subsidies

Several income sources that feel like money in the household budget are explicitly excluded from MAGI because federal Marketplace rules follow the IRS definition of taxable income rather than a broader cash-flow definition. Excluding an item does not mean it is hidden or ignored elsewhere; it simply is not added to the MAGI figure used to size a 2026 premium tax credit.

• Supplemental Security Income (SSI), which is a needs-based federal benefit, not Social Security retirement or disability income.
• Child support received.
• Gifts, inheritances, and life insurance payouts.
• Veterans disability benefits and workers' compensation.
• Pre-tax payroll deductions: 401(k) or 403(b) contributions, employer health insurance premiums, and health savings account (HSA) contributions taken out before wages are reported.
• Federal financial aid used for tuition, and most scholarship or grant money used directly for education expenses.
• SNAP, TANF, and housing assistance benefits.

Whose Income Counts: Household MAGI, Not Just Yours

The 2026 Marketplace application does not ask for the income of the person who is applying alone. It asks for the combined MAGI of every person in the tax household: the tax filer, the filer's spouse if filing jointly, and any tax dependents who are required to file their own return because their income exceeds the IRS filing threshold. A dependent's income below the filing threshold, such as a teenager's part-time summer job, is not added to household MAGI even though that person is on the same Marketplace application.

Because the Marketplace uses projected annual income for the full 2026 plan year rather than last year's tax return, applicants must estimate income going forward: a raise starting in March, a new job, or expected freelance contracts all need to be built into the estimate. Reporting a life change like a new job or marriage through HealthCare.gov as soon as it happens keeps the subsidy amount accurate and avoids a large repayment when the household reconciles income on Form 8962 at tax time.

The 400% FPL Subsidy Cliff Returns for 2026

For 2026 plan-year coverage, ACA Marketplace applications compare a household's MAGI against the 2025 federal poverty guidelines, which set the poverty line at $15,650 for a household of one and $32,150 for a household of four in the 48 contiguous states and DC. The enhanced premium tax credits created by the American Rescue Plan and extended through the Inflation Reduction Act expired on January 1, 2026, so the original ACA subsidy structure is back for 2026: households between 100% and 400% of the federal poverty level qualify for a premium tax credit, and households above 400% FPL get zero subsidy, no matter how small the overage.

In dollar terms for 2026, 400% of the federal poverty level is $62,600 in MAGI for a household of one and $128,600 for a household of four. Under the applicable percentage table in IRS Rev. Proc. 2025-25, households pay roughly 2.10% of income toward the benchmark plan premium near 100% FPL, rising to close to 9.96% of income near 400% FPL, before the credit picks up the rest. Cross the 400% line by even one dollar of MAGI and the entire premium tax credit disappears for that plan year, which is why an accurate income estimate matters more in 2026 than it did while the enhanced credits were in effect.

If Your Income Is Hard to Predict: Self-Employed, Gig, and Seasonal Workers

Self-employed applicants, gig workers, and seasonal employees do not have a W-2 to project from, so the 2026 Marketplace application asks for a best estimate based on prior-year tax returns, current contracts, and expected business expenses. Overestimating income leads to a smaller monthly credit than necessary; underestimating leads to owing money back at tax time on Form 8962 if actual MAGI ends up higher than projected.

Three practical steps reduce the risk of a large reconciliation bill. First, use net self-employment income (after deductible expenses), not gross revenue, when entering an estimate. Second, update the income estimate on HealthCare.gov whenever a contract ends, a new client starts, or seasonal work changes, rather than waiting for open enrollment. Third, keep a running log of 1099 income and expenses throughout 2026 so the year-end Schedule C matches what was reported to the Marketplace as closely as possible.

How This Differs from Medicare's Income Rules (IRMAA)

MAGI is not exclusive to the ACA Marketplace. Original Medicare uses a similar but separate calculation to decide the Income-Related Monthly Adjustment Amount (IRMAA), an income-based surcharge added to Medicare Part B and Medicare Part D premiums for higher earners. Medicare's IRMAA MAGI looks back two tax years (2026 premiums use 2024 tax return MAGI) and includes the same core categories: wages, capital gains, taxable Social Security, and tax-exempt interest.

The practical difference matters for people approaching age 65: Medicare Part A is premium-free for most beneficiaries and carries no IRMAA surcharge, Medicare Advantage plan premiums can also carry a Part D IRMAA surcharge if the underlying plan includes drug coverage, and Medigap premiums are not income-adjusted at all. Someone leaving ACA Marketplace coverage for Original Medicare should not assume the MAGI figure that determined their 2026 premium tax credit will be the same figure Medicare uses for IRMAA two years later; each program calculates and looks back independently.

Does Social Security count as income for ACA subsidies in 2026?

Yes. Social Security retirement, disability (SSDI), and survivor benefits all count toward MAGI in full, including the portion that is not federally taxable. This is different from Supplemental Security Income (SSI), which is a separate needs-based program and does not count toward MAGI at all.

Does child support count as income for ACA subsidies?

No. Child support received is excluded from MAGI under federal Marketplace rules because it is not taxable income under IRS rules. Alimony received also does not count toward MAGI for divorce agreements finalized on or after January 1, 2019, though pre-2019 alimony agreements still count.

Do 401(k) contributions lower my MAGI for ACA subsidies?

Yes, indirectly. Pre-tax 401(k) and traditional IRA contributions reduce your adjusted gross income (AGI) before MAGI is calculated, which lowers your reported MAGI and can increase your 2026 premium tax credit. Roth 401(k) and Roth IRA contributions do not reduce MAGI because they are made with after-tax dollars.

What income do I use for ACA subsidies if I'm self-employed?

Use net self-employment income, meaning gross business revenue minus deductible business expenses, as reported on Schedule C. The Marketplace wants a projection of 2026 net income, not last year's actual net income, so update the estimate whenever contracts, clients, or expenses change materially during the year.

Does unemployment compensation count toward ACA subsidy income?

Yes. All state unemployment insurance benefits count in full toward MAGI for 2026 ACA subsidy purposes. This is unchanged from prior years; the temporary unemployment-income exclusion that applied only to 2020 tax returns is not in effect for 2026.

What happens if I estimate my 2026 income wrong for ACA subsidies?

You reconcile the difference on IRS Form 8962 when you file your 2026 tax return. If your actual MAGI ends up lower than estimated, you may get an additional credit as a tax refund. If actual MAGI is higher than estimated, especially if it crosses the 400% federal poverty level line, you may have to repay some or all of the premium tax credit you received.

Is the income Medicaid counts the same as the income the ACA Marketplace counts?

Mostly yes, but not always. Both Medicaid and the ACA Marketplace use MAGI-based methodology for most applicants, but Medicaid has additional state-specific rules and some populations (people over 65, people with disabilities applying through non-MAGI pathways) use a different, older income and asset test that the Marketplace does not use.

Does MAGI for ACA subsidies differ from MAGI for Medicare IRMAA?

Yes. Both start from adjusted gross income plus tax-exempt interest, but Medicare's Income-Related Monthly Adjustment Amount (IRMAA) for Medicare Part B and Medicare Part D premiums looks back two tax years, while ACA Marketplace MAGI uses a current-year projected estimate. A household's 2026 ACA subsidy MAGI and a Medicare enrollee's 2026 IRMAA MAGI (based on a 2024 tax return) are calculated independently and can differ significantly.

Does a preexisting condition change how income is counted for ACA subsidies?

No. MAGI-based premium tax credit eligibility is entirely separate from health status. ACA-compliant Marketplace plans must guarantee-issue coverage and cannot charge more, deny enrollment, or exclude essential health benefits because of a preexisting condition. Income determines only the size of the subsidy, not whether a plan will cover you.