The Marketplace asks what you expect to earn next year. For someone on a salary that is an easy question. For a farmer, a contractor, a commissioned salesperson or anyone whose work is seasonal, it is the hardest part of the whole process — and it is the part that decides your premium tax credit.
This guide is the method we use at the table. It contains no figures, because thresholds change every year and vary by household size and state. For current numbers, use HealthCare.gov or the Marketplace Call Center.
What you are actually being asked
The estimate is your household’s expected income for the coming calendar year, for everyone on your tax return — not last year’s figure, and not just yours.
The credit is reconciled at tax time against what you actually earned. Estimate too low and you may owe some of it back. Estimate too high and you receive a smaller credit through the year than you were entitled to, and get the difference back as a refund.
Neither outcome is a disaster. The one worth avoiding is the large surprise, and that is what a decent method prevents.
The method
Start with last year’s tax return, not with a guess. Take the actual figure and use it as a baseline. It is a fact, and facts are a better starting point than optimism.
Adjust for what you already know. A contract that ended. A new one that begins in March. A field taken out of production. A spouse’s hours changing. Only adjust for changes you can name — “I expect it to be a better year” is not an adjustment, it is a mood.
Average the volatile part across several years, not one. If your income swings, one year tells you very little. Three or five years tells you the shape of it. Use the average of the volatile component and add the stable component on top.
For self-employment, use net, not gross. The figure that counts is what lands on your tax return after allowable business expenses. People routinely estimate from turnover and get a badly wrong answer.
Write down the working. Not for anyone else — for you, in June, when something changes and you need to know what you assumed.
The parts people forget
The estimate is household income for tax purposes, which is broader than wages. It includes self-employment income, most retirement distributions, interest and dividends, rental income, capital gains, and certain other items. It includes the income of anyone you claim as a dependent who is required to file.
Two that catch people specifically: a one-off event — selling equipment, selling land, taking a lump sum from a retirement account — lands in that year and can move you a long way. And for early retirees, the timing of withdrawals is partly within your control, which means the credit is partly within your control too.
When to revise it
This is the half of the job nobody mentions, and it is the half that produces unpleasant tax-time surprises.
Report a change when it happens, not at the end of the year. A raise, a new job, a contract ending, a marriage, a divorce, a birth, someone joining or leaving your tax household. The Marketplace adjusts your credit going forward, which keeps the reconciliation small.
Diarise a mid-year check. For a variable income, look at where you actually are around the middle of the year and compare it against the estimate. If it is drifting, revise then rather than in December.
Tell us as well, if we placed your plan. We will do the update with you and there is no charge for it. That is the part of the work that never appears in a brochure and does most of the good.
If you genuinely cannot predict it
Some incomes are not predictable. A farm year turns on weather. Commission turns on a market.
Two practical positions. First, estimate towards the middle rather than the optimistic end — a smaller credit through the year is easier to live with than a repayment. Second, if the year turns out much better than you expected, revise upward as soon as you know, rather than banking the difference and meeting it at tax time.
If your income is low enough that Medicaid or CHIP may be in play, that is a different conversation with different rules, and it is worth having before you estimate anything.
Where to get help with the arithmetic
HealthCare.gov walks through the estimate with you and will calculate your credit. The Marketplace Call Center is open 24 hours on 1-800-318-2596, TTY 1-855-889-4325, and costs nothing.
Navigators and certified application counselors give free in-person help and are not paid by insurance companies. Find one at localhelp.healthcare.gov.
And if you would rather sit with someone who does this all day, telephone us. We are paid by the insurance company, not by you, and the estimate conversation is where we spend most of our time.
General information, not advice
This guide describes how Marketplace coverage generally works. It is not advice about your situation, and rules and figures change — verify anything that matters to a decision against HealthCare.gov or the Marketplace Call Center on 1-800-318-2596 (TTY 1-855-889-4325), both free.
Heartland Coverage Partners LLC is not the Health Insurance Marketplace, not HealthCare.gov, and not connected with or endorsed by the United States government. We do not offer every plan available in your area.
