SSDI counts as income for Obamacare, which may lower your tax credits and raise your monthly premiums

When you enroll in a health plan through the Affordable Care Act (ACA) marketplace, the government uses your reported income to calculate how much of your premium you pay out of pocket. SSDI (Social Security Disability Insurance) payments count as taxable income for this calculation, even though you may not owe federal income tax on them. This means receiving SSDI can reduce the size of your tax credit and increase what you pay each month for coverage.

The amount SSDI reduces your credit depends on your total household income, your age, and which year you're calculating for. If your SSDI payment pushes your income above certain thresholds, you may lose some or all of your tax credit. You report your expected SSDI income when you create or update your marketplace account, and the marketplace uses that figure to set your credit before the year begins.

This creates a real trade-off: SSDI provides monthly cash, but it also counts against you when you shop for health insurance. Understanding how much of your credit you'll lose helps you budget for premiums and decide whether to adjust your coverage level.

Key Takeaways

  • SSDI payments are counted as income on your ACA marketplace process, which reduces the tax credit you receive to help pay premiums.
  • You must report your expected SSDI income when you enroll or update your plan each year, and the marketplace uses that number to calculate your credit before coverage starts.
  • If your SSDI income is very low, you may still receive a substantial tax credit; if it is higher, your credit shrinks or disappears entirely.
  • You can update your income information on the marketplace if your SSDI amount changes, and doing so may increase your credit mid-year.
  • Some people with SSDI income below certain thresholds may also be may be able to access for Medicaid instead of or in addition to marketplace coverage.

How the marketplace calculates your tax credit with SSDI income

The ACA marketplace compares your household income to the federal poverty line for your family size. Your tax credit is largest when your income is between 100% and 150% of the poverty line, and it shrinks as your income rises. Once your income reaches 400% of the poverty line, you receive no tax credit at all.

The poverty line changes each year. For 2024, the federal poverty line for a single person is $15,060 per year. If you receive $1,000 per month in SSDI, your annual income is $12,000, which is below the poverty line. At that income level, you would receive a substantial tax credit. If you receive $1,500 per month ($18,000 per year), your income exceeds the poverty line, and your credit is smaller.

When you report your income to the marketplace, you enter your expected income for the full year ahead. The marketplace then calculates your credit based on that projection and applies it to your monthly premiums. If your actual income turns out to be different—for example, if your SSDI payment changes—you can report the change and your credit will be recalculated.

Reporting SSDI income when you enroll or renew

You report SSDI income on the marketplace process under "household income." The marketplace asks for your expected income for the calendar year, not just your current monthly payment. If you receive $1,200 per month, you would report $14,400 as your annual income.

When you renew your coverage each year (usually in the fall), the marketplace sends you a notice asking you to confirm or update your income. If your SSDI amount has changed, you update it at that time. If you do not update and your actual income is different from what you reported, you may owe back some of your tax credit when you file your taxes the following year.

You can also update your income between open enrollment periods if your SSDI payment changes. Social Security sends you a notice when your benefit amount changes. Once you receive that notice, you can log into your marketplace account and report the new amount. The marketplace will recalculate your credit, and the new amount will take effect on the first of the following month.

What happens if your SSDI payment changes mid-year

SSDI payments can change for several reasons: a cost-of-living adjustment (COLA) each January, a change in your work activity, or a medical review. When your payment changes, Social Security sends you a notice with your new monthly amount.

Once you receive that notice, report the change to the marketplace as soon as possible. Log into your account, go to "Income," and update your expected annual income based on the new monthly payment. The marketplace will recalculate your tax credit and send you a new notice showing your updated premium.

If your SSDI increases, your tax credit may decrease, which means your monthly premium will go up. If your SSDI decreases, your credit may increase, lowering your premium. The change takes effect on the first day of the month after you report it, so there may be a lag between when your SSDI payment changes and when your marketplace premium adjusts.

SSDI income and Medicaid may be able to access

Some people with SSDI income are also may be able to access for Medicaid, which is free or very low-cost coverage run by your state. Medicaid rules vary by state, but most states use your SSDI income to determine whether you may have access to.

If your SSDI payment is very low—typically under $1,000 per month—you may be may be able to access for Medicaid in your state. You can explore for Medicaid through your state's Medicaid office or through the marketplace at the same time you explore for ACA coverage. In some states, you can have both Medicaid and a marketplace plan, though Medicaid will be your primary coverage.

Before you enroll in a marketplace plan, check whether you might be may be able to access for Medicaid in your state. Your state's Medicaid office or a local benefits counselor can tell you the income limits and help you understand whether Medicaid is an option for you.

Reconciling your tax credit when you file taxes

At the end of the year, you receive a Form 1095-B from your health insurance company showing the months you were covered. If you received a tax credit during the year, you also receive a Form 1095-A from the marketplace showing how much credit you received each month.

When you file your federal income tax return, you report your actual income for the year and reconcile it against the tax credit you received. If your actual income was lower than you reported, you may be owed a refund. If your actual income was higher, you may owe some of the credit back.

For example, if you reported $14,400 in SSDI income but your actual income was $12,000 because your payment was reduced mid-year and you did not update the marketplace, you would owe back some of your tax credit. This is why updating the marketplace when your SSDI changes is important—it prevents a surprise bill at tax time.

Strategies for managing SSDI income and marketplace premiums

If your SSDI income is close to a threshold where your tax credit drops significantly, you may want to explore other coverage options. Some people with SSDI income choose to enroll in Medicaid if they are may be able to access, or to use a catastrophic plan (available to people under 30 or those with a hardship exemption) if their income is too high for a tax credit.

You can also use the marketplace calculator before you enroll to see how different income levels affect your credit and premium. This helps you understand what your actual out-of-pocket cost will be and whether a marketplace plan makes sense for your budget.

If you have questions about how your specific SSDI amount will affect your marketplace costs, contact your state's marketplace directly or speak with a benefits counselor. Many states offer free counseling through organizations that specialize in helping people with disabilities understand their coverage options.

Frequently Asked Questions

Will I lose my SSDI if I report it to the marketplace?

No. Reporting your SSDI income to the marketplace for health insurance purposes does not affect your SSDI payments. The marketplace and Social Security are separate programs. You must report your income to the marketplace to receive accurate tax credits, but doing so will not change your SSDI benefit amount.

What if I don't report my SSDI income to the marketplace?

If you do not report your SSDI income, you may receive a larger tax credit than you are may have access to to. When you file your taxes, the IRS will compare your actual income to the credit you received and you may owe money back. It is better to report accurately upfront to avoid a tax bill later.

Can I have both SSDI and Medicaid?

Yes. Many people receive both SSDI and Medicaid. Medicaid may be able to access depends on your state and your income level. If you are may be able to access for Medicaid, it becomes your primary coverage and you do not need a marketplace plan. Contact your state's Medicaid office to find out whether you may have access to.

Does my SSDI count toward the out-of-pocket maximum on my marketplace plan?

No. Your SSDI income is used to calculate your tax credit, but it does not count toward your out-of-pocket maximum or deductible. Those limits are based on the cost of medical services you receive, not on your income.

What if my SSDI payment increases in January?

Social Security sends a notice when your payment increases (usually due to a cost-of-living adjustment). Once you receive the notice, update your income on the marketplace. Your tax credit will be recalculated and your new premium will take effect the following month. If you wait until your next annual renewal to report the increase, you may owe back some of your tax credit at tax time.