Interest

Interest income is the money you earn from savings accounts, CDs, bonds, money market accounts, and other interest-bearing financial products. It counts as part of your income for Marketplace subsidy calculations, and a specific type of interest income, tax-exempt interest, is one of the items that differentiates MAGI from AGI.

Most interest income (from bank accounts, CDs, Treasury bonds, corporate bonds) is included in your AGI on your tax return. Tax-exempt interest, primarily from municipal bonds, isn't included in AGI but is added back when calculating your MAGI. This means muni bond interest, while not taxed by the IRS, still counts toward your income for Marketplace subsidy purposes.

For most households, interest income has a modest impact on subsidy eligibility. But in a high-interest-rate environment, significant savings balances or bond holdings can generate enough interest to move your MAGI higher than expected. Early retirees or people between jobs who are living on savings should factor this in when estimating Marketplace income.

When completing your Marketplace application, include expected interest from all taxable accounts and add back any tax-exempt interest you expect to receive. Being accurate here helps avoid reconciliation surprises at tax time.