What income counts for ACA subsidies?

MAGI for ACA purposes is not the same MAGI used for other tax rules, and it is a household number, not just yours. It includes the income of your spouse and any tax dependents who are required to file a return, even if those dependents do not need coverage. Getting the household definition wrong is one of the most common reasons subsidy estimates come out wrong, and for 2026 the stakes are higher because subsidies now cut off entirely above 400% of the federal poverty level, roughly $62,600 for a single person for 2026 coverage.

What counts and what does not

The formula: start with adjusted gross income from your tax return, then add back tax-exempt interest, untaxed Social Security, and excluded foreign earned income. For most people with simple finances, MAGI is close to AGI.

Whose income goes in the household

Your tax household is the tax filer, a spouse if filing jointly, and everyone claimed as a dependent. A dependent’s income counts only if that dependent earns enough to be required to file a tax return. A 17-year-old with a small summer job usually adds nothing; an adult child you claim who earns significant wages usually does. Married couples generally must file jointly to qualify for premium tax credits, with limited exceptions such as certain survivors of domestic abuse or abandonment.

Why the estimate matters more in 2026

You report projected income for the coverage year when you apply, and the IRS reconciles it against your actual MAGI at tax time on Form 8962. For 2026, two things changed. The enhanced subsidies expired at the end of 2025, so eligibility now ends above 400% of the poverty level. And repayment caps were eliminated for the 2026 tax year, so an underestimate can require paying back the full excess.

Example: a self-employed married couple, both 58, estimate $80,000 of MAGI for 2026. A strong fourth quarter pushes actual MAGI to $130,000, past 400% of the poverty level for a household of two. Every dollar of advance subsidy they received for 2026 may have to be repaid at tax time. A deductible traditional IRA or HSA contribution, or timing a Roth conversion into a different year, may change the outcome, depending on your situation.

Here’s what I tell clients: update your marketplace application the same week your income changes, not at tax time. The application takes minutes; the reconciliation surprise can run into thousands.