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Are Health Insurance Subsidies Based on This Year’s Income?

Healthcare Writer

Last updated March 18th, 2020

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Your health insurance subsidy is based on your income for the current year. When asked about income, don’t use your information from last year.

Since the year isn’t over yet, this is always an estimate of your annual income. You’ll have to make your best guess as to how much you’ll make in the current year. If you’re having trouble, multiply your monthly income by twelve.

Don’t just put down last year’s income. However, that number could help you figure out what you’ll make this year.

What Is a Health Insurance Premium Subsidy?

You can get a huge discount on monthly premiums when you buy Affordable Care Act insurance on your own. This discount is based on your income. It’s called a premium subsidy, or a premium tax credit.

Premiums are the monthly payments you make to stay on an insurance plan. Subsidies are discount payments to you. In this case, the subsidies go directly to your health insurance plan, so that you pay lower premiums.

Where Do You Enter Your Income for Health Insurance?

To calculate your discount, HealthCare.com will ask for your income. (You may read this as annual household income, modified adjusted gross income, or yearly income – they’re all very similar.)

Your discount will be the same across all plans, even though their monthly premiums are different.

Some “silver” plans may include additional services for people who receive premium subsidies.

Your premium subsidy is processed automatically. You don’t have to do the math or fill out paperwork to get it every month. It’s a popular feature that’s a part of all subsidy-eligible health plans.

What if My Estimated Income Is Wrong?

It’s OK if your estimated income is a little off! When you file taxes next year, you’ll square up with the government.

If you underestimated your income, you’ll have to pay back a portion of the difference. The government calls this a “clawback”. Depending on your actual income, you likely won’t be responsible for paying the full difference.

If you overestimated your income, you’ll receive the subsidy that you didn’t get before.

Where Can I Calculate My Subsidy?

HealthCare.com has you covered. Our tool below will figure out your subsidy in under 2 minutes.

Thanks V.G.!

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