What income is used for marketplace subsidies

The income figure is MAGI

The Marketplace does not ask for gross pay and stop there. It starts with adjusted gross income and adds several items that can be easy to miss. The result is modified adjusted gross income, usually called MAGI.

The practical rule is to use the tax return you expect to file, then add the income items the Marketplace instructions list. Tax-exempt interest, foreign earned income that is excluded from taxable income, and certain other items can raise MAGI even when they do not feel like take-home pay. If you are unsure, use the official income page and ask a tax preparer.

Do not use last year's tax return without checking whether this year looks different. A new job, a raise, a retirement distribution, or a business profit can change the estimate. The application is built around a projection, not a history lesson.

Whose income counts

Household income is not only the applicant's income. It includes the income of everyone in the tax household who is required to file a return, plus the income of people who are claimed as dependents in some situations. Marriage, divorce, a new dependent, or a child leaving the household can all change the figure.

That is why two people with the same salary can qualify for different amounts. The household composition changes the poverty guideline and the income that is counted. A single applicant with a child is not compared with a single applicant who lives alone.

If a household member files separately, the rules can be more complicated. Do not assume that one person's return is the whole story. Use the official household income rules and, when the facts are unusual, ask the Marketplace or a tax preparer.

Which poverty guideline year applies

For 2026 coverage, the Marketplace uses the poverty guidelines published for 2025. This is a common source of confusion. The table is one year behind the coverage year because the Marketplace uses the prior-year guidelines for the premium tax credit calculation.

For a household of 4, the 2025 annual poverty guideline is $32,150.00. That figure is the base for the percentage tests. The 400 percent limit for the same household is $128,600.00.

Alaska and Hawaii use higher guidelines. A household of more than eight people adds an amount for each additional person. Use the official table for the exact figure.

The 400 percent limit

Under the rules reflected in the current data, premium tax credits generally end above 400 percent of the federal poverty line. That is a cliff, not a gradual reduction. A household just above the line can lose the credit, while a household just below it can still receive help.

The enhanced subsidy provisions are shown as expired in the data layer. That means a household above the 400 percent line should not assume an extension exists. The law can change, so check the current status before you rely on a guide or an old news article.

The 400 percent rule is not the only limit. Even below the line, the amount of help depends on the benchmark plan premium, the household income, and the applicable percentage. A household can be below the line and still pay a substantial share of the premium.

What changes MAGI

Income from a job, self-employment, unemployment, Social Security, pensions, and investments can all count. A Roth conversion can count. Tax-exempt interest can count. A one-time capital gain can count. The list is broad, and the details depend on the tax return.

Some items are excluded or treated differently. A qualified distribution from a Roth account is generally not taxable income, but the rest of the return still matters. A loan is not income. A reimbursement is not income. A gift is not income. The labels people use in conversation are not the same as the lines on a tax return.

The safest approach is to build the estimate from the return, line by line, then compare it with the Marketplace instructions. If the number is close to a cliff, a small error can change the result.

Worked example

A household of 4 expects $100,000.00 of MAGI for the coverage year. The prior-year poverty guideline is $32,150.00. The household income is about 311 percent of the poverty line, which is below the 400 percent limit of $128,600.00.

At that income, the applicable percentage is 9.96%. The expected annual contribution toward a benchmark plan is $9,960.00, or about $830.00 a month. The actual premium tax credit depends on the benchmark premium for the household and the plan chosen. This page does not invent a benchmark premium, so it stops at the contribution figure.

The headroom to the 400 percent line is $28,600.00. That is the amount of additional MAGI that would remove the household from the credit range under the current rules.

What to do before you apply

Gather the tax return for the most recent year, pay stubs or a profit-and-loss statement for the current year, and documents for any other income. Write down the household members and who claims whom. Then use the official income page to check the MAGI items you might have missed.

If the estimate is near the 400 percent line, consider whether a deduction or a timing change is available. Do not hide income to stay under the line, and do not assume a small overage will be ignored. The application asks for a good-faith projection.

A checklist for the estimate

Build the estimate in the same order as the tax return. Start with wages, self-employment income, and retirement distributions. Add interest, dividends, capital gains, and rental income. Add the items the Marketplace instructions require even when they are not taxable in the usual sense.

Then list the household members and confirm who is claimed on the return. Check the prior-year poverty guideline for that household size. Compare the projected income with the 400 percent line. If the result is close, write down the headroom and keep it with the application.

Finally, note the date of the estimate and the documents used. If the income changes during the year, the note shows what was known when the application was filed. That is useful if the credit is reconciled later.

Marketplace MAGI vs taxable income

Marketplace MAGI and taxable income are related, but they are not the same figure. Taxable income comes after deductions. MAGI starts with adjusted gross income, which is before the standard or itemized deduction, and then adds certain items the Marketplace counts.

That difference can be large. A household that takes the standard deduction may have modest taxable income and a much higher MAGI. A household with tax-exempt interest may have no tax on the interest but still see it in the Marketplace calculation. A household with excluded foreign income may owe no US tax on that income and still have to add it back for the credit test.

Above-the-line deductions are the ones that can help. A deductible traditional IRA contribution, a health savings account contribution that meets the rules, and certain self-employed retirement contributions can reduce AGI. A charitable deduction or a mortgage interest deduction generally does not reduce MAGI because it comes later in the return.

Capital gains deserve special attention. A large gain can raise MAGI even if the tax rate on the gain is low or zero. A Roth conversion can raise MAGI even though the conversion is a deliberate retirement move. A withdrawal from a traditional IRA or 401(k) can raise MAGI unless it is a qualified rollover.

The practical approach is to start with the expected tax return, not with a pay stub. Add the Marketplace items, subtract the above-the-line deductions that apply, and compare the result with the poverty guideline. Keep the worksheet with the application. If the household has self- employment income, foreign income, or a one-time event, ask a tax preparer to check the MAGI before the application is filed.

Three honest caveats

1. The poverty guideline year is not the coverage year. Using the wrong table can change the percentage and the credit.
2. This page does not calculate a premium tax credit because the benchmark premium is not in the data layer. It explains the income test and the limit.
3. The enhanced subsidy rules can change. Check the current law and the official Marketplace page before relying on any statement about the 400 percent line.

Frequently asked questions

Is marketplace subsidy income based on gross income?

It is based on modified adjusted gross income, which starts with adjusted gross income and adds certain items. Gross pay alone can overstate or understate the figure.

Do Social Security benefits count for marketplace subsidies?

Taxable Social Security benefits are generally part of adjusted gross income. The Marketplace instructions and the tax return determine how the benefit is treated in a specific household.

Which poverty level year does the marketplace use?

For 2026 coverage, the Marketplace uses the 2025 federal poverty guidelines. That is why the table can look one year behind the coverage year.

Does a Roth conversion count as income for subsidies?

A taxable Roth conversion generally raises adjusted gross income in the conversion year. It can therefore affect the premium tax credit estimate.

What happens if my income changes during the year?

You are expected to update the Marketplace when your income or household changes. A change can adjust the credit and the amount owed at tax time.

Does a dependent’s income count?

It can, depending on the tax household and the filing rules. Use the official household income instructions for the specific situation.

Source table

Figure	Value used	Official source
Marketplace income rules	MAGI and household income	HealthCare.gov income pageChecked October 28, 2026
Premium tax credit basics	Eligibility and calculation	HealthCare.gov savings pageChecked October 28, 2026
Poverty guideline for 2025	$32,150.00 for a household of 4	HHS poverty guidelinesChecked October 28, 2026
Applicable percentage	9.96%	IRS affordability revenue procedureChecked October 28, 2026
Enhanced subsidy status	expired	Congressional Research ServiceChecked October 28, 2026

What to do next

Check the employer coverage affordability calculator if a job-based plan is also in the picture. Then read the 400 FPL subsidy cliff guide for the household-size limits and the family glitch fix explained guide for the family premium test.