Understanding ACA Income Requirements
A Comprehensive Guide to Income Eligibility for the Affordable Care Act
What Are ACA Income Requirements?
The Affordable Care Act (ACA) provides financial assistance through premium tax credits and cost-sharing reductions to help individuals and families afford health insurance purchased through the Health Insurance Marketplace. Eligibility for these subsidies is based on your Modified Adjusted Gross Income (MAGI) in relation to the Federal Poverty Level (FPL).
Under the ACA, you may qualify for premium tax credits if your household income falls between 100% and 400% of the FPL. Some states have expanded Medicaid to cover individuals with incomes up to 138% of the FPL.
What Income COUNTS Toward ACA Eligibility?
For ACA purposes, your Modified Adjusted Gross Income (MAGI) includes:
- Wages, salaries, and tips: All compensation from employment, including bonuses and commissions
- Self-employment income: Net profit from business activities, freelancing, or contract work
- Investment income: Interest, dividends, capital gains, and rental property income
- Retirement income: Distributions from traditional IRAs, 401(k)s, pensions, and annuities
- Taxable Social Security benefits: The portion of Social Security that is subject to federal income tax
- Alimony received: Alimony payments received (for divorces finalized before 2019)
- Unemployment compensation: Benefits received while unemployed
- Foreign earned income: Income earned while working abroad
- Taxable scholarships and grants: Educational funding that exceeds qualified expenses
- Farm income: Net profit from farming operations
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IRS - Premium Tax Credit Q&AWhat Income DOES NOT COUNT Toward ACA Eligibility?
The following types of income are excluded from MAGI calculations:
- Supplemental Security Income (SSI): Federal assistance for disabled, blind, or elderly individuals
- Child support: Payments received for the support of dependent children
- Gifts and inheritances: Money or property received as gifts or through inheritance
- Workers' compensation: Benefits for work-related injuries or illnesses
- Veterans' benefits: VA disability payments and other veterans' assistance
- Life insurance proceeds: Death benefits paid to beneficiaries
- Welfare benefits: TANF, SNAP, and other public assistance programs
- Roth IRA distributions: Qualified distributions from Roth retirement accounts
- Tax-exempt interest: Interest from municipal bonds (though it's added back for MAGI)
- Non-taxable scholarships: Educational grants used for tuition and required fees
- Foster care payments: Payments for caring for foster children
- Loans: Student loans, personal loans, or any borrowed money
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HealthCare.gov - Income Information2025 Federal Poverty Level (FPL) Guidelines
The Federal Poverty Level is updated annually and used to determine eligibility for ACA subsidies. Below are the 2025 FPL guidelines for the 48 contiguous states and D.C. (Alaska and Hawaii have different thresholds).
| Household Size | 100% FPL | 138% FPL (Medicaid) |
400% FPL |
|---|---|---|---|
| 1 | $15,060 | $20,783 | $60,240 |
| 2 | $20,440 | $28,207 | $81,760 |
| 3 | $25,820 | $35,632 | $103,280 |
| 4 | $31,200 | $43,056 | $124,800 |
| 5 | $36,580 | $50,480 | $146,320 |
| 6 | $41,960 | $57,905 | $167,840 |
| 7 | $47,340 | $65,329 | $189,360 |
| 8 | $52,720 | $72,754 | $210,880 |
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HHS Poverty GuidelinesUnderstanding Subsidy Eligibility
Premium Tax Credits
Premium tax credits help lower your monthly insurance premium. Eligibility is based on income between 100% and 400% of the FPL, though income limits were temporarily removed and have been extended through 2025. The amount of the credit is calculated on a sliding scale, with lower-income households receiving larger subsidies.
Cost-Sharing Reductions
If your income is between 100% and 250% of the FPL, you may qualify for cost-sharing reductions that lower your out-of-pocket costs like deductibles, copayments, and coinsurance. These are only available with Silver-level plans.
Medicaid Expansion
In states that have expanded Medicaid, individuals with incomes up to 138% of the FPL may qualify for Medicaid coverage at little to no cost. As of 2025, 40 states and D.C. have expanded Medicaid eligibility.
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HealthCare.gov - Premium Tax CreditsFrequently Asked Questions
This is a common situation for retirees, students, or individuals living off savings. Here's what you need to know:
Savings in bank accounts do not count as income for ACA purposes. The ACA only considers your Modified Adjusted Gross Income (MAGI), which is based on taxable income flows, not assets or savings balances.
However, any interest or investment earnings generated by your savings **does count** as income. For example, if you have $100,000 in a savings account earning interest, the interest income counts toward your MAGI, but the $100,000 principal does not.
Important Considerations:
- Income Below 100% FPL: If you have little to no income and fall below 100% of the Federal Poverty Level, you may not qualify for ACA premium tax credits. In Medicaid expansion states, you would likely qualify for Medicaid. In non-expansion states, this creates a coverage gap.
- Estimating Low Income: When applying, you must estimate your income for the year. If you genuinely expect to have some income (even minimal self-employment income, odd jobs, or investment earnings), you can report that estimate. You'll reconcile the actual amount when you file taxes.
- Withdrawing from Savings: Simply withdrawing money from a regular savings or checking account is not considered income. However, withdrawals from retirement accounts like traditional IRAs or 401(k)s are taxable and count as income.
- Asset Tests: Unlike Medicaid in some states (which may have asset limits), ACA subsidies do not have asset tests. You could have substantial savings and still qualify for premium tax credits if your annual income is within the eligible range.
Key Points to Remember
- Income is calculated based on your **Modified Adjusted Gross Income (MAGI)**, not your take-home pay
- You must **estimate your income** for the coverage year when applying
- If your actual income differs from your estimate, you'll reconcile the difference when **filing taxes**
- Report major income changes to the Marketplace within 30 days to **adjust your subsidy**
- Different FPL thresholds apply in **Alaska and Hawaii** due to higher cost of living
- Household size includes yourself, your spouse, and **dependents you claim** on your tax return