Do Untaxable Disability Wages Impact Tax Credits?
I receive long term disability payment payments from aetna twice a month of $1046 each, they send me a w-2 for these payments, and are marked with a J code which is un-taxable insurance policy so when I bought my insurance from the healthcare.gov I claimed $25,000 but if it’s un-claimable is it income for my health care insurance cause on my next year’s taxes it will be zero.
Answer
ObamaCare's tax credits are based on annual household income (filers MAGI plus dependents AGI). MAGI includes non-taxable disability payments. Third party sick pay, marked CODE J isn't taxable and doesn't have to be claimed (but is added to Modified Adjusted Gross Income). Therefore this money counts toward tax credits.
To qualify for tax credits MAGI must be between 100% - 400% of the Federal Poverty Level. So a taxable income of zero would be an issue, but your taxable income of about $25,000 is correct as a projection for HealthCare.Gov. Just make sure you are explaining your non-taxable income correctly when projecting income for HealthCare.Gov. At the end of the day, you are responsible for projecting your income correctly.
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For purposes of the ACA and the premium tax credit, household income is what is used to determine eligibility for and the amount of the premium tax credit a taxpayer will receive. IRC section 36B(d)(2) defines household income as taxable income used to determine the taxpayer’s adjusted gross income plus three specific items that must be added back as defined under IRC 36B(d)(2)(B)(i)-(iii):
•Amounts excluded under IRC section 911 (income exclusions for US persons living abroad)
•Tax exempt interest
•Nontaxable social security benefits
If the amount is not specifically listed as an item that has to be added back, it is not considered income under the ACA. Thus, in this case, the nontaxable disability benefits are not considered income for the purposes of determining eligibility for and the amount of premium tax credit the taxpayer is eligible to receive. Household income will also include the income of anyone else on the taxpayer’s return (such as a dependent) that has enough income to require a return to be filed.
I am receiving benefits from my long term insurance in which i paid the premiums for this insurance. It stops in july of this year. It is a non taxable check. When applying for ky connect health insurance for 2017, do i report this as income?
As a rule of thumb on anything from a retirement account, to social security benefits, to life insurance: if it’s taxable income it counts toward MAGI and if it’s not taxable (for example it was pre-taxed income) then it doesn’t count.
The general answer is easy to give, the specific depend on the specifics of the account. See this page for more information: https://obamacarefacts.com/questions/how-does-life-insurance-income-affect-obamacare/