The Affordable Care Act (ACA) determines eligibility for subsidies and Medicaid using Modified Adjusted Gross Income (MAGI), which starts with your Adjusted Gross Income (AGI) (closer to net income on your tax return) and adds back certain non-taxable income like tax-exempt interest and non-taxable Social Security benefits. So, it's not purely gross or net, but a specific calculation based on tax forms.
Share. Under the Affordable Care Act, eligibility for income-based Medicaid and subsidized health insurance through the Marketplaces is calculated using a household's Modified Adjusted Gross Income (MAGI).
The amount of tax may vary from based on earned or unearned income but, with taxes expected to stay level or increase over time (and factoring in the overall low cost of term life insurance), the best approach is to insure to the gross value.
For the 2025 tax year, if you underestimated your income and received a larger advance premium tax credit than you were eligible for, you must repay the difference between the amount of tax credit you received and the amount you were eligible for.
If you overestimate your income and end up with less financial assistance than you are entitled to, the difference will be refunded to you when you file your income taxes the following year.
What income types to count in your estimate
In 2025, the major event for Obamacare (ACA) is the scheduled expiration of enhanced premium tax credits (subsidies) at the end of the year, which will significantly increase health insurance costs for millions in 2026, potentially leading to higher premiums and fewer enrollees, though some legislative efforts (like the One Big Beautiful Bill Act in late 2025) introduced other changes, including stricter verification for Medicaid/ACA recipients and medical student loan adjustments.
We use the most recent federal tax return the IRS provides to us. If you must pay higher premiums, we use a sliding scale to calculate the adjustments. This is based on your "modified adjusted gross income" (MAGI).
Sources of money income that are missing from AGI include welfare payments, interest on state and local government bonds, employer-provided contri- butions for health and pension plans, and income on savings through life insurance.
To calculate gross income, sum up all your earnings from various sources before any taxes or deductions, including wages, salaries, bonuses, tips, rental income, interest, and dividends; for hourly workers, multiply hourly rate by hours worked, then annualize and divide by 12, while for salaried employees, divide annual salary by 12 to get monthly gross income. The key is to include all money earned before anything is taken out for taxes, insurance, or retirement.
How adjusted net income is calculated
You are not eligible for Obamacare if: You do not live in the U.S. You are incarcerated. You are not a U.S. citizen, U.S. national, or lawfully present noncitizen in the U.S.
If you don't qualify for the premium tax credit on a Marketplace plan because your income is too high, you can still apply for health coverage through the Marketplace. To apply, create an account or log in.
A poverty wage in the U.S. is generally considered any pay that keeps a full-time worker below the federal poverty line (FPL), which for 2024 was around $15,060 for an individual and $31,200 for a family of four, making the federal minimum wage of $7.25/hour a poverty wage for full-time work. These thresholds, updated annually by HHS, determine eligibility for assistance programs, with higher figures for Alaska and Hawaii due to cost of living differences.
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Annual income is the amount of money that you earn in a year. Annual income can be gross (the amount of money you earn before your employer takes out taxes or insurance) or net (the amount of money you take home after taxes). Knowing your annual income is useful when you fill out credit applications or set your budget.