Tuesday, October 1, 2013

For Obamacare Purposes, Your Income May Be Lower Than Your Salary

As people are beginning to navigate the five-question Obamacare flowchart, it's important to remember that the Affordable Care Act defines "income" as "Modified Adjusted Gross Income". Many line items on form 1040 that people commonly refer to as "deductions" are technically "adjustments to income", meaning that they will not count as income for purposes of determining Medicaid or subsidy eligibility. Most importantly, tax-favored retirement contributions (401k, deductible IRA, SEP, SIMPLE), student loan interest for low-income & middle-class households, and alimony do not count as income for Medicaid/subsidy eligibility. Other pre-tax employer deductions, such as commuter expenses, daycare FSAs, and the like, also don't count as income.

Another important note is that Social Security income, which is non-taxable for many people, does count as income under the ACA.

The Berkley Labor Center put together list of what counts as income under Obamacare, which you might find handy.

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