Do Capital Gains Count as Income for Obamacare? (2024)

Do Capital Gains Count as Income for Obamacare? (1)The Patient Protection and Affordable Care Act of 2010 provided comprehensive health care reform in an effort to make affordable health insurance available to more individuals. Also known as the ACA or “Obamacare” (as the bill was signed into law by then-President Barack Obama), the legislation enabled uninsured employees and self-employed individuals to buy affordable healthcare insurance.

But the ACA isn’t universal healthcare. Those participating need to purchase insurance products from state-specific Health Insurance Marketplaces (also known as Exchanges). Additionally, the “affordability” component comes in the form of a tax credit. That tax credit, in turn, is determined by earned income. Which brings up the question: Do capital gains count as income for Obamacare?

Gift of the MAGI

There are many different income types, for many different purposes. Those who own real estate might pay attention to net operating income, which is calculated by subtracting reasonably necessary operating expenses from property-generated revenue. This is similar to, but not the same as, net income, which is total revenue (or gross income) minus total expenses. There is also adjusted gross income (AGI), which is total revenue subtracted by allowable deductions (retirement plan contributions, medical expenses, capital losses, and school tuition).

Then there is the modified adjusted gross income, or MAGI.

MAGI isn’t found on any tax returns, but it’s what the government uses to determine premium subsidy amounts available to individuals who buy their insurance through the Health Insurance Marketplace.

Components of Modified Income

MAGI is adjusted gross income minus certain deductions, which include foreign income, tax-exempt interest, and non-taxable social security benefits. Meanwhile, the “income” portion of MAGI includes federal taxable wages, tips, self-employment income (revenue minus business expenses), unemployment compensation, social security earnings – and capital gains.

The ACA premium subsidy considers the MAGI, relative to the federal property level for a particular household size. Basically, the higher the MAGI, the lower the premium subsidy received. So, if someone receiving insurance through the Health Insurance Marketplace sells a house or other capital asset property in a given year, the capital gains on that sale are part and parcel of the modified adjusted gross income.

Mo’ Money

Realized® has published numerous blogs about capital gains, what it is, and how it’s taxed. Understanding capital gains is also important when it comes to issues like adjusted gross income and modified gross income. As such, those buying healthcare insurance from ACA Exchanges should understand the impact that capital gains might have on the health insurance subsidies they receive.

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice, meeting the particular investment needs of any investor.

Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.

Do Capital Gains Count as Income for Obamacare? (2024)
Top Articles
Latest Posts
Article information

Author: Dr. Pierre Goyette

Last Updated:

Views: 6134

Rating: 5 / 5 (70 voted)

Reviews: 93% of readers found this page helpful

Author information

Name: Dr. Pierre Goyette

Birthday: 1998-01-29

Address: Apt. 611 3357 Yong Plain, West Audra, IL 70053

Phone: +5819954278378

Job: Construction Director

Hobby: Embroidery, Creative writing, Shopping, Driving, Stand-up comedy, Coffee roasting, Scrapbooking

Introduction: My name is Dr. Pierre Goyette, I am a enchanting, powerful, jolly, rich, graceful, colorful, zany person who loves writing and wants to share my knowledge and understanding with you.