Quick answer
The Marketplace uses your household’s modified adjusted gross income (MAGI), which is the adjusted gross income on your federal tax return plus any untaxed foreign income, nontaxable Social Security and tax-exempt interest. Wages, self-employment profit, unemployment, most retirement withdrawals and all of your Social Security count, while child support, gifts, SSI, veterans’ disability payments and loans don’t. For 2027 coverage, a premium tax credit is available from 100% to 400% of the poverty level, or $15,960 to $63,840 for one person.
Key takeaways
- MAGI starts with the adjusted gross income on your federal tax return, then adds back untaxed foreign income, nontaxable Social Security and tax-exempt interest.
- You count the income of everyone in your tax household who’s required to file a federal tax return, including your spouse.
- Pre-tax 401(k) contributions, HSA contributions and deductible traditional IRA contributions lower your MAGI, while the standard deduction and itemized deductions don’t.
- For 2027 coverage, the premium tax credit range is $21,640 to $86,560 for a couple and $33,000 to $132,000 for a family of four.
- Starting with 2026 coverage, there’s no cap on paying back extra advance credit, so an estimate that’s too low can cost you the full difference at tax time.
On this page
How the Marketplace measures income
Marketplace savings are based on modified adjusted gross income, or MAGI. For most people, MAGI is the same as the adjusted gross income on their tax return. You add three things if you have them: untaxed foreign income, the part of your Social Security that isn’t taxed, and tax-exempt interest.
What matters is your expected income for the year you want coverage. For a 2027 plan, that’s your best estimate of 2027 income, not what you made in 2025 or 2026. Medicaid and CHIP use MAGI rules too, but Medicaid looks at your current monthly income; see Medicaid income limits by state.
What counts and what doesn’t
| Counts as income | Doesn’t count |
|---|---|
| Wages, salaries and tips | Child support |
| Self-employment income after business expenses | Gifts |
| Unemployment compensation | Supplemental Security Income (SSI) |
| Social Security, including the untaxed part, and SSDI | Veterans’ disability payments |
| Pensions and most IRA and 401(k) withdrawals | Workers’ compensation |
| Net rental and royalty income | Loan proceeds, such as student or home equity loans |
| Interest and dividends, including tax-exempt interest | Child Tax Credit payments |
| Capital gains and untaxed foreign income | Qualified Roth account withdrawals |
| Alimony from divorces finalized before 2019 | Alimony from divorces finalized in 2019 or later |
For wages, use the “federal taxable wages” on your pay stub if it shows them. If not, start with gross pay and subtract what your employer takes out for retirement plans, health coverage and child care. The new federal tax deductions for tips and overtime pay, available through 2028, don’t reduce adjusted gross income, so tips and overtime still count in full.
Who’s in your household
Your Marketplace household is your tax household: you, your spouse if you’re married, and anyone you’ll claim as a tax dependent. List them even if they don’t need coverage. Leave off a former or legally separated spouse, roommates and a baby who hasn’t been born yet. Other relatives who live with you count only if you’ll claim them.
Income counts for everyone in that household who’s required to file a federal tax return. A dependent’s income from a part-time job, for example, is included only if they have to file. Married couples generally need to file jointly to get a premium tax credit; if you file separately, you can enroll together but won’t get a credit or other savings.
How to estimate income that changes
Start with the adjusted gross income on your most recent tax return, then adjust for what you expect: a new job, a raise or pay cut, fewer hours, retirement, or a change in business income. If you’re self-employed, use your expected profit after business expenses. If your income is hard to predict, HealthCare.gov suggests basing it on your past experience and recent trends, and it offers an income calculator. More in health insurance for the self-employed.
If the Marketplace asks you to prove your income, a tax return or W-2s, recent pay stubs, a self-employment ledger or a letter explaining your income can work.
Ways to lower your MAGI
These reduce the income the Marketplace counts:
- Pre-tax contributions to a 401(k), 403(b) or similar plan at work.
- HSA contributions, if you have an HSA-eligible plan. Bronze and catastrophic Marketplace plans count as HSA-eligible since 2026; see what an HSA is.
- Deductible contributions to a traditional IRA. Roth IRA contributions don’t help.
- For the self-employed, contributions to a SEP IRA, SIMPLE IRA or solo 401(k), the deductible half of self-employment tax, and in some cases the self-employed health insurance deduction.
- Other adjustments on your return, such as student loan interest and educator expenses.
The standard deduction and itemized deductions don’t lower MAGI, because they come off after adjusted gross income is figured.
Here’s how it can help near the top of the range. A couple expecting $88,000 for 2027 is above the $86,560 cutoff for two people and wouldn’t qualify for a premium tax credit. Putting another $2,000 into a pre-tax 401(k) through payroll would bring their MAGI to $86,000, back under the line.
The 2027 income range for a premium tax credit
| Household size | 100% of poverty | 138% of poverty | 400% of poverty |
|---|---|---|---|
| 1 | $15,960 | $22,025 | $63,840 |
| 2 | $21,640 | $29,863 | $86,560 |
| 3 | $27,320 | $37,702 | $109,280 |
| 4 | $33,000 | $45,540 | $132,000 |
In states that expanded Medicaid, adults under 138% of the poverty level usually qualify for Medicaid instead. Above 400%, there’s no premium tax credit for 2027. If your income is under 250%, you may also get cost-sharing reductions on a silver plan. For how much you’d pay at each level, see 2027 Obamacare income limits.
What happens at tax time
When you file, Form 8962 compares the advance credit you received with the credit you qualify for based on your actual income and household. If you were owed more, the difference is added to your refund or subtracted from what you owe. If you got too much, you pay it back, and starting with 2026 coverage there’s no cap on that repayment.
The cliff at 400% makes small misses expensive. In one healthinsurance.org example for 2026, a 55-year-old couple in Montana who estimated $84,000 but earned $85,000, just over the line, would have to repay their whole subsidy, about $13,080. See paying back the premium tax credit.
Report changes during the year
Federal rules give you 30 days to report a change in income or household, and HealthCare.gov asks you to do it as soon as possible. Updating your application adjusts your advance credit for the rest of the year, which helps keep a raise from turning into a big tax bill. If your income drops, you may qualify for more help or for Medicaid. See what happens if you under-report your income.
See what your 2027 income estimate means for your premium: compare plans by ZIP code.
Frequently asked questions
Does Social Security count as income for the Marketplace?
Yes. Include all of your Social Security benefits, including any part that isn’t taxed, and SSDI. Supplemental Security Income (SSI) doesn’t count.
Does child support count as income?
No. Child support you receive isn’t counted, and neither are gifts or loan proceeds.
Should I use last year’s income on my application?
Use it as a starting point, then adjust for the changes you expect. Your savings are based on your estimated 2027 income, and the final credit is settled on your 2027 tax return.
Sources
This article is general information, not insurance, tax or legal advice. How your income is counted depends on your tax return, so check unusual situations with a tax professional. Last reviewed October 2026.