Investment Income

Investment income is the money you earn from financial assets, including capital gains, dividends, interest, rental income, and royalties. All of these count toward your Modified Adjusted Gross Income (MAGI) and can affect your eligibility for Marketplace premium tax credits and cost-sharing reductions.

This matters most for people whose day-to-day income is modest but who have significant investment holdings: early retirees, freelancers with investment portfolios, or families who sold property during the year. A year with high investment returns could push your MAGI above the subsidy threshold, even if your wages are well within the qualifying range.

With the subsidy cliff back at 400% FPL for 2026, investment income timing becomes a strategic decision. Selling investments, taking retirement account distributions, or receiving large dividend payouts all add to your MAGI for that year. Planning when to realize gains, and how much to take in a single year, can meaningfully affect your health insurance costs.

Withdrawals from traditional IRAs and 401(k)s count as income (and thus affect MAGI). Withdrawals from Roth IRAs generally do not count as income, an important distinction for retirees managing their subsidy eligibility.

If investment income is a significant part of your financial picture, consider working with a tax professional or financial advisor who understands the Marketplace income rules. The intersection of investment decisions and health insurance subsidies is one of the most overlooked areas of financial planning.