For purposes of calculating your federal health tax credit, the Affordable Care Act uses the same definition of household income as the IRS.
The IRS defines household income as the modified adjusted gross income of all household members who are required to file a tax return. This amount includes income from all family members who earn enough to file a tax return and also includes any Social Security benefits.
On your 2014 tax return it is:
- Line 4 if you filed a Form 1040EZ
- Line 21 if you filed a Form 1040A
- Line 37 if you filed a Form 1040
For my family, that means I would include my spouse’s income and my income (line 37, Form 1040) — plus my teen-age son’s summer job income (line 4 on his form 1040EZ).
Since the federal premium tax credits are reconciled each year on each family’s annual tax return, we advise individuals to conservatively estimate their income when applying for a premium tax credit. For example, if you think your total household income will be about $38,000, enter $40,000 on the state exchange insurance application.
In our view, it is preferable to receive a refund at tax time than have a nasty surprise because you owe the IRS some of your premium tax credit back. All dollars that are forwarded as premium tax credits get reconciled to the penny each year.