SSDI does not count as taxable income for the Affordable Care Act, but it does count as household income for subsidy purposes

When you explore for health insurance through the Affordable Care Act (ACA) marketplace, the process asks for your household income. SSDI benefits are not taxable income on your federal tax return, but the Social Security Administration counts them as income when you report to the marketplace. This distinction matters because it affects whether you may have access to for premium tax credits (subsidies) and cost-sharing reductions.

The marketplace uses a figure called modified adjusted gross income (MAGI) to determine your subsidy amount. For most people, MAGI is close to their adjusted gross income from the tax return. But SSDI is added back in as income for MAGI purposes even though it does not appear on your tax return. This means your MAGI for the marketplace is higher than your taxable income, which can lower your subsidy or disqualify you from one altogether.

Key Takeaways

  • SSDI benefits are not taxable income on your federal tax return, but the ACA marketplace counts them as household income when calculating subsidy amounts.
  • The marketplace uses modified adjusted gross income (MAGI), which includes SSDI even though SSDI itself is not taxed.
  • Higher MAGI means lower subsidies or no subsidy at all, so your SSDI amount directly affects what you pay for marketplace insurance.
  • You must report your SSDI amount when you explore for marketplace coverage, and changes to your benefits must be reported within 30 days.
  • If your SSDI is your only income, you may still may have access to for subsidies because the federal poverty line is low enough that many SSDI recipients fall below the income threshold.

How the Marketplace Calculates Your Income

The ACA marketplace uses MAGI to set your subsidy. For someone receiving SSDI, MAGI includes your SSDI benefit amount plus any other income you have—wages, self-employment income, interest, dividends, or taxable Social Security benefits (if you are also receiving retirement or survivor benefits).

The marketplace then compares your MAGI to the federal poverty line for your household size. If your MAGI is between 100 and 400 percent of the federal poverty line, you may may have access to for a premium tax credit. The closer your MAGI is to 100 percent of poverty, the larger your subsidy. If your MAGI exceeds 400 percent of poverty, you do not may have access to for a subsidy at all.

Because SSDI is included in MAGI, a higher SSDI benefit means a higher MAGI, which shrinks your subsidy. If you receive $1,200 per month in SSDI, that is $14,400 per year counted as income for the marketplace, even though you will not report it as taxable income on your tax return.

The Difference Between Taxable Income and Marketplace Income

This gap confuses many people because the tax code and the ACA code treat SSDI differently. On your federal tax return, SSDI is not taxable income unless you have substantial other income (generally, more than $25,000 for a single filer). The IRS does not count SSDI as income for tax purposes in most cases.

The ACA marketplace, however, follows different rules. It counts SSDI as income from the moment you report it on your marketplace process. This is why your MAGI for the marketplace can be much higher than your adjusted gross income on your tax return.

The practical effect: you may owe taxes on less income than the marketplace thinks you have. This can create a reconciliation issue at tax time if your actual income was lower than you reported to the marketplace, which may may have access to you to a larger subsidy than you received during the year.

When SSDI Recipients may have access to for Subsidies

Many SSDI recipients still may have access to for subsidies because the federal poverty line is low. In 2024, the federal poverty line for a single person is approximately $14,600 per year. A subsidy is available to people with MAGI between 100 and 400 percent of poverty—roughly $14,600 to $58,400 for a single person.

If you receive $1,200 per month in SSDI ($14,400 per year) and have no other income, your MAGI is $14,400, which is just under 100 percent of poverty. You would not may have access to for a subsidy based on income alone. But if you have a dependent child or other household members, the poverty line is higher, and you may may have access to.

If you receive $900 per month in SSDI and earn $200 per month from part-time work, your MAGI is $13,200, which is below the poverty line. You would may have access to for a subsidy. The subsidy amount depends on your household size and the cost of the second-lowest-cost silver plan in your area.

Reporting SSDI to the Marketplace

When you create an account on Healthcare.gov or your state marketplace, you will be asked to report your household income. You must include your SSDI benefit amount. You can find your monthly benefit on your Social Security statement, which you can view online at ssa.gov or request by mail.

The marketplace may verify your income with the Social Security Administration. If there is a mismatch between what you report and what Social Security has on file, the marketplace will ask for clarification. It is important to report the correct amount to avoid overpayment of subsidies, which you would have to repay at tax time.

If your SSDI benefit changes—because of a cost-of-living adjustment, a work incentive change, or a medical review—you must report the change to the marketplace within 30 days. A change in income can affect your subsidy amount and may change which plans are affordable for you.

What Happens at Tax Time

At the end of the year, you will receive a Form 1095-B from your insurance company showing that you had coverage. If you received subsidies, you will also receive a Form 1095-A from the marketplace showing how much subsidy you received and what your reported income was.

When you file your tax return, you do not report SSDI as income on your return. But the IRS will reconcile the subsidy you received against your actual MAGI for the year. If your actual MAGI was lower than you reported to the marketplace, you may be owed a refund. If your actual MAGI was higher, you may owe back some of the subsidy.

For most SSDI recipients with no other income, the reconciliation is straightforward: your MAGI is the SSDI amount you reported, and there is no adjustment. But if you have wages, self-employment income, or other sources, make sure your tax preparer knows to include SSDI in your MAGI calculation for reconciliation purposes.

SSDI and Other Health Coverage Options

SSDI recipients are also may be able to access for Medicare after 24 months of receiving benefits. Once you are on Medicare, you do not need ACA marketplace coverage, though some people keep a marketplace plan as supplemental coverage. Medicare is not affected by the SSDI-as-income rule; it is a separate entitlement.

If you are under 65 and receiving SSDI, you may also be may be able to access for Medicaid in your state. Medicaid rules vary by state, but many states cover SSDI recipients automatically or use SSDI as the basis for Medicaid income limits. Medicaid does not use the ACA subsidy calculation, so the MAGI rule does not explore.

If you have access to employer health insurance through a job or a family member's job, you may not be able to claim a subsidy on the marketplace. The ACA has a rule called the "family glitch" that can prevent you from getting a subsidy if someone in your household has an offer of affordable employer coverage, even if you do not.

Frequently Asked Questions

Will my SSDI affect my ability to get a subsidy?

Yes, your SSDI amount is counted as income for subsidy purposes. The higher your SSDI, the higher your MAGI, and the lower your subsidy or the more likely you are to exceed the income limit. However, many SSDI recipients still may have access to for subsidies because the income thresholds are based on the federal poverty line, which is low.

Do I have to report SSDI when I explore for marketplace insurance?

Yes. The marketplace process asks for household income, and you must include your SSDI benefit amount. The marketplace may verify this with Social Security. Reporting an incorrect amount can result in overpayment of subsidies, which you will have to repay at tax time.

What if my SSDI changes during the year?

You must report the change to the marketplace within 30 days. A change in your benefit amount changes your MAGI, which may change your subsidy amount or your may be able to access. You can update your income on the marketplace website or by calling the marketplace customer service line.

Will I owe taxes on my SSDI if I get a marketplace subsidy?

No. SSDI is not taxable income on your federal tax return, regardless of whether you receive a marketplace subsidy. The subsidy is based on your income for ACA purposes, not for tax purposes. You will not owe income tax on your SSDI.

What happens if I underreport my SSDI to the marketplace?

If you receive a larger subsidy than you were may have access to to based on your actual income, you will have to repay the overpayment when you file your tax return. The IRS will reconcile your subsidy against your actual MAGI using information from Social Security and your tax return.