My column in the Nov. 18 issue of the New York Observer has generated a ton of mail and a lot of questions about the issue many of us are facing: How to estimate income on the Exchange application. From the column:
The state exchange number put me on hold. I hung up and called Premera. “You can sign up with us directly,” a very helpful rep told me, “but if there’s a chance your income could qualify you for a subsidy, it’s best to go through the state exchange.”
So: Back to the exchange website. Enter birth dates, zip code, tobacco use, yadda yadda, monthly income. Stop. Ponder.
Which month, brother? For that matter, which year? Do you want gross, net, before SE (self-employment tax, a k a Social Security payments) or after? AGI (adjusted gross income) from last year’s 1040?
All my fellow freelancers and contract workers wanted to know: What's the number?
I got ahold of the Washington State Insurance Commissioner's office this morning. They said it's a question they get asked a lot. Their answer came straight from the IRS definition:
For purposes of the premium tax credit, your household income is your modified adjusted gross income plus that of every other individual in your family for whom you can properly claim a personal exemption deduction and who is required to file a federal income tax return.
In other words, it's AGI.* Which is good news for most of us. AGI is the figure that's on the front page of your 1040, it's the number that's arrived at after all SE tax and deductions have been subtracted from your gross income. The trick is to estimate what your AGI is going to be for the year in which you're covered. In other words the AGI figure isn't a lookback; it runs concurrent with your insurance premium. So you're not estimating what your final AGI will be for 2013. You're estimating what it's going to be in 2014.
Here's an IRS FAQ on the topic. If I hear more or differently, I'll report back. Good luck.
* Actually, "modified" AGI, which apparently makes a difference to those who receive Social Security or retirement income from tax free bonds. See Jeff Thomas' helpful comment below. And remember: I am not a tax professional.