What counts as income for ACA subsidies if I retire early?
Marketplace subsidies use modified adjusted gross income. It includes IRA withdrawals, capital gains and tax-free Social Security, but not qualified Roth withdrawals.
The definition
HealthCare.gov defines the income for savings as your adjusted gross income (Form 1040, line 11) plus untaxed foreign income, non-taxable Social Security benefits and tax-exempt interest.
What counts
- Wages and self-employment income after expenses
- Interest, dividends and capital gains
- Most IRA and 401(k) withdrawals
- Roth conversions (the taxable amount)
- Net rental and royalty income
- Social Security, both taxable and non-taxable
- Tax-exempt interest and untaxed foreign income
- State unemployment compensation
What does not count
- Qualified distributions from a Roth account
- Gifts
- Loan proceeds, such as a home equity loan
- Child support
- Veterans' disability payments and workers' compensation
Why this matters for early retirees
You choose where your spending money comes from. Cash savings, loan proceeds and qualified Roth withdrawals do not raise this income, while traditional IRA withdrawals, Roth conversions and realized gains do. Capital gains count even when the federal capital gains rate is 0%. For plan year 2027, a single person's credit ends above $63,840 and a two-person household's above $86,560.
Report changes and watch the repayment rule
Update the Marketplace when your income changes. The IRS says that starting with tax year 2026 there is no cap on repaying excess advance credit, so if your actual income is higher than you estimated you may owe back the full difference when you file.
Estimate your subsidy → · The 400% cliff explained →
Common questions
Do Roth IRA withdrawals count as income for ACA subsidies?
Qualified distributions from a Roth account do not count, which is why many early retirees spend Roth or cash savings in years they want a lower income.
Do capital gains taxed at 0% still count?
Yes. Capital gains are part of the income used for marketplace subsidies even if no federal tax is due on them.
What if my income changes during the year?
Tell the Marketplace as soon as possible so your advance credit matches your income. Otherwise you may miss savings or owe money back at tax time.
Keep reading
Sources: HealthCare.gov: what counts as income; IRS: repayment caps eliminated; IRS Rev. Proc. 2026-26