Does Inheritance Count As Income For Marketplace Insurance?

Are you wondering, “Does Inheritance Count As Income For Marketplace Insurance?” The answer is generally no, inheritance does not count as income for marketplace insurance eligibility on income-partners.net. However, to fully understand how your eligibility is determined, especially if you’re looking to connect with strategic partners to enhance your income, it’s crucial to delve into the details of Modified Adjusted Gross Income (MAGI).

1. Understanding Modified Adjusted Gross Income (MAGI)

Modified Adjusted Gross Income (MAGI) is a crucial metric used to determine financial eligibility for several key programs in the United States, including the premium tax credit for health insurance purchased through the Health Insurance Marketplace, most categories of Medicaid, and the Children’s Health Insurance Program (CHIP). Understanding MAGI is essential for individuals and families seeking affordable healthcare options.

1.1. What is MAGI?

MAGI is not simply your gross income. Instead, it’s a specific calculation based on your adjusted gross income (AGI) plus certain additional items. According to the Affordable Care Act (ACA), MAGI includes AGI, tax-exempt interest, non-taxable Social Security benefits, and excluded foreign income. The MAGI calculation ensures a standardized way to assess income across different states and programs.

1.2. Components of MAGI

To fully grasp MAGI, it’s important to understand its components:

Adjusted Gross Income (AGI): AGI is your gross income (total income before any deductions) minus certain “above-the-line” deductions. These deductions can include contributions to traditional IRAs, student loan interest payments, and health savings account (HSA) contributions. AGI is the starting point for calculating MAGI.
Tax-Exempt Interest: This includes interest earned from municipal bonds and certain other investments that are exempt from federal income tax. Even though this interest isn’t taxed, it is included in MAGI.
Non-Taxable Social Security Benefits: If you receive Social Security benefits, the portion that is not subject to federal income tax is added to your AGI to calculate MAGI. The amount of Social Security benefits that are taxable depends on your overall income level.
Excluded Foreign Income: If you are a U.S. citizen or resident alien living abroad and you exclude some of your income for tax purposes under Section 911 of the Internal Revenue Code, this excluded income is added back into your MAGI.

1.3. Calculating MAGI: A Step-by-Step Guide

Calculating your MAGI involves a few straightforward steps:

Determine Your Gross Income: Start by calculating your total income from all sources, including wages, salaries, tips, business income, and investment income.
Subtract Above-the-Line Deductions: Deduct any eligible above-the-line deductions, such as IRA contributions and student loan interest, to arrive at your Adjusted Gross Income (AGI). Refer to IRS Publication 17 for detailed information on these deductions.
Add Tax-Exempt Interest: Include any tax-exempt interest you earned during the year.
Add Non-Taxable Social Security Benefits: Include the portion of your Social Security benefits that was not subject to federal income tax.
Add Excluded Foreign Income: If applicable, add back any foreign income you excluded under Section 911 of the Internal Revenue Code.

The result is your MAGI, which is then used to determine your eligibility for premium tax credits, Medicaid, and CHIP.

1.4. Why MAGI Matters

MAGI is a critical factor in determining your eligibility for various healthcare programs. It is used to assess whether you qualify for financial assistance, such as premium tax credits to lower your monthly health insurance premiums or Medicaid coverage. Understanding how MAGI is calculated can help you estimate your eligibility and plan your healthcare coverage effectively.

1.5. Resources for Calculating MAGI

Several resources are available to help you calculate your MAGI accurately:

IRS Publications: IRS Publication 17 provides detailed information on above-the-line deductions, while IRS Publication 525 discusses various types of taxable and non-taxable income.
Healthcare.gov: The official Health Insurance Marketplace website offers tools and resources to help you estimate your income and determine your eligibility for financial assistance.
Tax Professionals: Consulting a tax professional can provide personalized guidance and ensure accurate MAGI calculation.

By understanding MAGI and how it is calculated, you can make informed decisions about your healthcare coverage and financial planning.

2. Defining Income for ACA Marketplace Eligibility

To determine eligibility for the Affordable Care Act (ACA) marketplace, a clear understanding of what constitutes “income” is essential. The ACA uses a specific income calculation known as Modified Adjusted Gross Income (MAGI) to assess eligibility for premium tax credits and cost-sharing reductions.

2.1. What Counts as Income?

Income, for ACA purposes, is broader than just your salary or wages. It includes any form of payment you receive, whether in cash, property, or services, that isn’t specifically exempt by law. Here’s a detailed breakdown of what’s typically included:

Wages and Salaries: This is the most common form of income, including your gross pay before deductions.
Tips and Bonuses: Any additional income you receive from tips or bonuses is also counted.
Self-Employment Income: If you’re self-employed, your income is your profit after deducting business expenses.
Investment Income: This includes dividends, interest, and capital gains from the sale of stocks or other investments.
Rental Income: If you own rental properties, the net income you receive after deducting expenses is included.
Retirement Income: Distributions from retirement accounts like 401(k)s and traditional IRAs are considered income.
Unemployment Compensation: Any unemployment benefits you receive are taxable and count towards your MAGI.
Social Security Benefits: While some Social Security benefits may not be taxable, they are included in MAGI.
Other Taxable Income: This can include alimony, royalties, and income from partnerships or S corporations.

2.2. What Doesn’t Count as Income?

Not all receipts are considered income for ACA purposes. Some common exclusions include:

Child Support: Payments received for child support are not considered income.
Gifts: Money or property received as a gift is generally not taxable and doesn’t count towards your MAGI.
Inheritances: As we’ll explore in detail, inheritances are typically excluded from income calculations for ACA eligibility.
Workers’ Compensation: Benefits received from workers’ compensation are not considered income.
Supplemental Security Income (SSI): SSI payments are not included in MAGI.
Temporary Assistance for Needy Families (TANF): TANF benefits are also excluded from income calculations.
Certain Veteran’s Benefits: Some veteran’s benefits are excluded, though it’s essential to verify specific benefits.

2.3. Pre-Tax Deductions

One important consideration is how pre-tax deductions affect your MAGI. Deductions like contributions to a 401(k) or health insurance premiums taken out of your paycheck before taxes reduce your taxable income and, therefore, your MAGI. This can potentially qualify you for a larger premium tax credit or make you eligible for Medicaid.

2.4. Example Scenarios

To illustrate, consider a few scenarios:

Scenario 1: John earns a salary of $50,000, receives $1,000 in dividends, and contributes $5,000 to his 401(k). His MAGI would be $46,000 ($50,000 + $1,000 – $5,000).
Scenario 2: Maria earns $30,000, receives $500 in tax-exempt interest, and receives $2,000 in non-taxable Social Security benefits. Her MAGI would be $32,500 ($30,000 + $500 + $2,000).
Scenario 3: David earns $60,000, but also receives an inheritance of $20,000. The inheritance does not count as income for ACA purposes, so his MAGI remains $60,000.

2.5. Verifying Income

When applying for ACA marketplace coverage, you’ll need to provide documentation to verify your income. This can include:

W-2 Forms: These show your wages and taxes withheld from your employer.
Pay Stubs: Recent pay stubs can help estimate your current income.
Tax Returns: Your most recent tax return provides a comprehensive overview of your income.
Self-Employment Records: If self-employed, you’ll need records of your income and expenses.
Social Security Statements: These show the benefits you receive from Social Security.

Understanding what counts as income and what doesn’t is crucial for accurately determining your eligibility for ACA marketplace coverage and financial assistance. Consulting with a tax professional or financial advisor can provide personalized guidance based on your unique situation.

3. Does Inheritance Count As Income?

When it comes to determining eligibility for marketplace insurance, understanding whether an inheritance counts as income is crucial. The short answer is generally no, inheritance is not considered income for the purposes of determining eligibility for premium tax credits or cost-sharing reductions under the Affordable Care Act (ACA).

3.1. The General Rule: Inheritance Is Not Income

According to the Internal Revenue Service (IRS), an inheritance is typically considered a gift, not income. This means that the recipient of the inheritance does not have to report it as income on their tax return. Consequently, it is not included in the calculation of Modified Adjusted Gross Income (MAGI), which is used to determine eligibility for ACA subsidies.

3.2. Why Inheritance Is Treated Differently

Inheritances are treated differently from income because they represent a transfer of wealth from the deceased to their beneficiaries. This transfer is subject to estate taxes at the federal level and, in some states, at the state level. Taxing the inheritance as income would, in effect, be a form of double taxation, which is why it is generally exempt from income tax.

3.3. Exceptions and Special Cases

While the general rule is that inheritances are not considered income, there are a few exceptions and special cases to be aware of:

Income Generated by Inherited Assets: If the inherited assets generate income, such as rental income from an inherited property or dividends from inherited stocks, that income is taxable and must be included in your MAGI.
Inherited Retirement Accounts: Inherited retirement accounts, such as 401(k)s or IRAs, have specific rules regarding taxation. Distributions from these accounts may be taxable, depending on the type of account and the beneficiary’s relationship to the deceased.
Annuities: If you inherit an annuity, the payments you receive may be partially taxable, depending on the amount of the original investment.

3.4. How to Handle Inheritance When Applying for Marketplace Insurance

When applying for marketplace insurance, it’s essential to accurately report your income. Since inheritances are generally not considered income, you do not need to include the value of the inheritance in your income estimate. However, if the inherited assets generate income, such as rental income or dividends, you must include that income in your MAGI.

3.5. Example Scenarios

To illustrate how inheritance is treated in different scenarios, consider the following examples:

Scenario 1: John inherits $100,000 from his deceased father. He does not need to report this inheritance as income when applying for marketplace insurance.
Scenario 2: Maria inherits a rental property that generates $1,000 per month in rental income. She must include this $12,000 annual rental income in her MAGI when applying for marketplace insurance.
Scenario 3: David inherits an IRA from his deceased mother. He takes a distribution from the IRA, which is subject to income tax. He must include the taxable portion of the distribution in his MAGI.

3.6. Consulting a Tax Professional

If you have inherited assets and are unsure how they will affect your eligibility for marketplace insurance, it’s always a good idea to consult with a tax professional. A tax professional can help you understand the tax implications of your inheritance and ensure that you accurately report your income when applying for marketplace insurance.

4. Impact of Non-Taxable Income on Marketplace Eligibility

While inheritances are generally excluded from income calculations for marketplace insurance, it’s crucial to understand how other forms of non-taxable income can impact your eligibility for premium tax credits and cost-sharing reductions.

4.1. Tax-Exempt Interest

Tax-exempt interest is a specific type of income that is not subject to federal income tax but is included in Modified Adjusted Gross Income (MAGI). This includes interest earned from municipal bonds and certain other investments. Even though you don’t pay federal income tax on this interest, it can affect your eligibility for marketplace subsidies.

4.1.1. How Tax-Exempt Interest Affects MAGI

When calculating your MAGI for marketplace eligibility, you must add any tax-exempt interest you received during the year to your adjusted gross income (AGI). This can increase your MAGI and potentially reduce the amount of premium tax credit you’re eligible for.

4.1.2. Example

Suppose your AGI is $40,000, and you received $1,000 in tax-exempt interest. Your MAGI would be $41,000. This higher MAGI could shift you into a different income bracket, affecting the amount of financial assistance you receive.

4.2. Non-Taxable Social Security Benefits

For many people, Social Security benefits are not taxed at all. However, if you have other sources of income, a portion of your Social Security benefits may be taxable. Regardless of whether your benefits are taxable, the full amount of your Social Security benefits is included in MAGI.

4.2.1. How Non-Taxable Social Security Benefits Affect MAGI

The inclusion of non-taxable Social Security benefits in MAGI can significantly impact your eligibility for marketplace subsidies, especially if you have limited other income.

4.2.2. Example

If your AGI is $20,000, and you receive $10,000 in non-taxable Social Security benefits, your MAGI would be $30,000. This could make you eligible for a larger premium tax credit or even qualify you for Medicaid, depending on your state’s income thresholds.

4.3. Excluded Foreign Income

U.S. citizens and resident aliens living outside the U.S. may be able to exclude some of their earned income for tax purposes under Section 911 of the Internal Revenue Code. However, any foreign income excluded under this section must be added back when calculating MAGI.

4.3.1. How Excluded Foreign Income Affects MAGI

The inclusion of excluded foreign income in MAGI ensures that individuals living abroad are assessed fairly for marketplace eligibility, based on their total economic resources.

4.3.2. Example

If your AGI is $30,000, and you excluded $15,000 in foreign income under Section 911, your MAGI would be $45,000. This could reduce the amount of premium tax credit you’re eligible for.

4.4. Other Forms of Non-Taxable Income

While tax-exempt interest, non-taxable Social Security benefits, and excluded foreign income are the most common forms of non-taxable income included in MAGI, there are a few other categories to be aware of:

Certain Native American and Alaska Native Income: Medicaid does not count certain Native American and Alaska Native income in MAGI.
Payments to Beneficiary of Deceased Employee: Payments made to the beneficiary of a deceased employee are not considered taxable income.
Federal Income Tax Refunds: Federal income tax refunds are not considered taxable income.
Gifts: Gifts are not considered taxable income.
Interest on Tax-Free Securities: Interest on tax-free securities is not considered taxable income.
Veterans’ Benefits: Veterans’ benefits are not considered taxable income.
Welfare Payments: Welfare payments are not considered taxable income.

4.5. Strategies for Managing Non-Taxable Income

While you can’t always control the amount of non-taxable income you receive, there are some strategies you can use to manage its impact on your marketplace eligibility:

Maximize Pre-Tax Deductions: Contributing to pre-tax retirement accounts, such as 401(k)s or traditional IRAs, can reduce your AGI and, therefore, your MAGI.
Consult with a Financial Advisor: A financial advisor can help you develop a comprehensive financial plan that takes into account your non-taxable income and its impact on your eligibility for marketplace subsidies.
Accurately Report Income: When applying for marketplace insurance, be sure to accurately report all sources of income, including non-taxable income, to avoid any issues with your eligibility.

5. Household Income vs. Individual Income

When determining eligibility for marketplace insurance, it’s crucial to understand the distinction between household income and individual income. The Affordable Care Act (ACA) uses household income, not individual income, to assess eligibility for premium tax credits and cost-sharing reductions.

5.1. Defining Household Income

Household income, for ACA purposes, includes the Modified Adjusted Gross Income (MAGI) of the tax filer, their spouse (if married filing jointly), and any tax dependents who are required to file a tax return. It’s important to note that a dependent’s income is only included if they have a tax filing requirement.

5.2. Who is Included in the Household?

The household includes:

The Tax Filer: The person who is applying for marketplace insurance.
The Tax Filer’s Spouse: If the tax filer is married and filing jointly, their spouse’s income is included.
Tax Dependents with a Filing Requirement: Any dependents claimed on the tax filer’s return who are required to file their own tax return.

5.3. Dependents and Filing Requirements

A dependent is required to file a tax return if they meet certain income thresholds. For example, in 2024, a dependent must file a tax return if they have:

At least $14,600 in earned income;
$1,300 in unearned income; or
If the earned and unearned income together totals more than the greater of $1,300 or earned income (up to $14,150) plus $450.

5.4. Example Scenarios

To illustrate how household income is calculated, consider the following scenarios:

Scenario 1: John is single and has no dependents. His household income is simply his MAGI.
Scenario 2: Maria and David are married and filing jointly. Their household income is the sum of their MAGIs.
Scenario 3: Sarah is claiming her 17-year-old daughter, Emily, as a dependent. Emily earned $10,000 from a summer job. Since Emily’s earned income is less than $14,600, she is not required to file a tax return. Therefore, Emily’s income is not included in Sarah’s household income.
Scenario 4: Michael is claiming his 20-year-old son, Alex, as a dependent. Alex earned $15,000 from a part-time job. Since Alex’s earned income exceeds $14,600, he is required to file a tax return. Therefore, Alex’s income is included in Michael’s household income.

5.5. Why Household Income Matters

Household income is used to determine your eligibility for premium tax credits and cost-sharing reductions. The higher your household income, the less financial assistance you may be eligible for. Conversely, the lower your household income, the more financial assistance you may be eligible for.

5.6. Estimating Household Income

When applying for marketplace insurance, you’ll need to estimate your household income for the upcoming year. This can be challenging, especially if your income fluctuates. However, it’s important to make your best estimate based on your current income, expected changes, and any other relevant factors.

5.7. Reporting Changes in Income

If your household income changes significantly during the year, it’s important to report those changes to the marketplace. This can affect the amount of premium tax credit you receive, and it’s important to ensure that you’re receiving the correct amount of financial assistance.

5.8. Resources for Understanding Household Income

Several resources are available to help you understand household income and its impact on marketplace eligibility:

Healthcare.gov: The official Health Insurance Marketplace website provides detailed information on household income and eligibility.
IRS Publications: IRS Publication 501 provides information on claiming dependents.
Tax Professionals: Consulting a tax professional can provide personalized guidance and ensure accurate income reporting.

6. Projecting Your Income for the Year

When applying for health insurance through the ACA marketplace, you’re required to estimate your income for the entire calendar year. This projected income is used to determine your eligibility for premium tax credits, which lower your monthly health insurance premiums. Accurately projecting your income is crucial for avoiding any surprises when you file your taxes.

6.1. Why Projecting Income Matters

The premium tax credit is an advanceable credit, meaning you receive the benefit upfront in the form of lower monthly premiums. However, the amount of the credit is based on your projected income for the year. If your actual income turns out to be different from your projected income, it can affect the amount of tax refund you receive or the amount of taxes you owe.

6.2. How to Project Your Income

Projecting your income involves estimating all sources of income you expect to receive during the year, including:

Wages and Salaries: Estimate your annual wages and salaries based on your current pay rate and expected hours.
Self-Employment Income: If you’re self-employed, estimate your net profit (income minus expenses) for the year.
Investment Income: Estimate any dividends, interest, or capital gains you expect to receive.
Rental Income: If you own rental properties, estimate your net rental income (rental income minus expenses).
Retirement Income: Estimate any distributions you expect to receive from retirement accounts.
Unemployment Compensation: If you expect to receive unemployment benefits, include those in your estimate.
Social Security Benefits: Include any Social Security benefits you expect to receive.
Other Taxable Income: Include any other sources of taxable income you expect to receive.

6.3. Factors to Consider

When projecting your income, consider the following factors:

Job Changes: If you expect to change jobs during the year, factor in any changes in pay rate or hours.
Business Fluctuations: If you’re self-employed, consider any expected changes in your business income or expenses.
Investment Performance: If you have investments, consider any expected changes in their value or dividend payouts.
Retirement Plans: If you plan to retire during the year, factor in any changes in your income and expenses.
Life Changes: Consider any major life changes, such as marriage, divorce, or the birth of a child, which could affect your income or expenses.

6.4. Using Past Tax Returns

Your past tax returns can be a valuable resource for projecting your income. Look at your previous year’s tax return to see what sources of income you had and how much you received from each source. Adjust those amounts based on any expected changes in your circumstances.

6.5. Reporting Changes in Income

If your income changes significantly during the year, it’s important to report those changes to the marketplace. This can affect the amount of premium tax credit you receive, and it’s important to ensure that you’re receiving the correct amount of financial assistance.

6.6. Avoiding Income Discrepancies

To avoid income discrepancies, keep accurate records of all your income and expenses. This will make it easier to project your income accurately and report any changes to the marketplace.

6.7. Resources for Projecting Income

Several resources are available to help you project your income accurately:

Healthcare.gov: The official Health Insurance Marketplace website provides tools and resources to help you estimate your income.
IRS Publications: IRS Publication 505 provides information on withholding taxes and estimated taxes.
Tax Professionals: Consulting a tax professional can provide personalized guidance and ensure accurate income projection.

7. Medicaid vs. Marketplace Insurance Income Rules

When it comes to healthcare coverage, understanding the differences between Medicaid and marketplace insurance income rules is crucial. Both programs use income to determine eligibility, but they calculate it differently and have different income thresholds.

7.1. Medicaid Income Rules

Medicaid provides healthcare coverage to low-income individuals and families. Eligibility for Medicaid is primarily based on income, but the specific income rules vary by state.

7.1.1. MAGI-Based Income

Most states use Modified Adjusted Gross Income (MAGI) to determine Medicaid eligibility. As previously discussed, MAGI includes adjusted gross income (AGI) plus tax-exempt interest, non-taxable Social Security benefits, and excluded foreign income.

7.1.2. Income Limits

The income limits for Medicaid eligibility vary by state and household size. Generally, Medicaid income limits are lower than those for marketplace insurance.

7.1.3. Monthly vs. Yearly Income

Medicaid eligibility is typically based on current monthly income. However, for individuals with fluctuating income, states must consider yearly income if the person wouldn’t be eligible based on monthly income alone.

7.1.4. Lump-Sum Income

Medicaid treats some lump-sum income differently than the ACA marketplace. Lump-sum income is considered only in the month it’s received and does not affect eligibility in subsequent months.

7.2. Marketplace Insurance Income Rules

Marketplace insurance provides healthcare coverage to individuals and families who don’t have access to affordable employer-sponsored insurance. Eligibility for premium tax credits and cost-sharing reductions is based on income.

7.2.1. MAGI-Based Income

Marketplace insurance also uses MAGI to determine eligibility for financial assistance.

7.2.2. Income Limits

The income limits for marketplace insurance eligibility are higher than those for Medicaid. Individuals with incomes between 100% and 400% of the federal poverty level (FPL) may be eligible for premium tax credits.

7.2.3. Yearly Income

Marketplace eligibility is based on projected yearly income. This means you’ll need to estimate your income for the entire calendar year when applying for coverage.

7.2.4. No Lump-Sum Income Exclusion

Unlike Medicaid, the marketplace does not exclude lump-sum income. All income received during the year is included in your MAGI, regardless of whether it’s received in a lump sum or regular installments.

7.3. Key Differences

Here’s a table summarizing the key differences between Medicaid and marketplace insurance income rules:

Feature	Medicaid	Marketplace Insurance
Income Basis	MAGI	MAGI
Income Limits	Lower than marketplace insurance	Higher than Medicaid
Income Timeframe	Typically monthly, but yearly income considered for fluctuating incomes	Yearly
Lump-Sum Income	Considered only in the month received	Included in yearly income
State Variation	Significant variation in income rules and eligibility criteria	More uniform income rules across states
Dependent’s Income	Dependent’s income is only included if they are required to file taxes	Dependent’s income is only included if they are required to file taxes

7.4. Coordinating Coverage

In some cases, individuals may be eligible for both Medicaid and marketplace insurance. However, you can’t be enrolled in both programs at the same time. If you’re eligible for Medicaid, you’ll generally be required to enroll in Medicaid rather than receiving premium tax credits for marketplace insurance.

7.5. Resources for Understanding Income Rules

Several resources are available to help you understand the income rules for Medicaid and marketplace insurance:

Healthcare.gov: The official Health Insurance Marketplace website provides detailed information on eligibility and income rules.
State Medicaid Agencies: Contact your state Medicaid agency for specific information on Medicaid eligibility in your state.
Tax Professionals: Consulting a tax professional can provide personalized guidance and ensure accurate income reporting.

8. Reporting Changes in Income to the Marketplace

Once you’ve enrolled in a health insurance plan through the ACA marketplace, it’s crucial to report any significant changes in your income. These changes can affect the amount of premium tax credit you receive and may even impact your eligibility for coverage.

8.1. Why Reporting Changes Matters

The premium tax credit is based on your projected income for the year. If your income changes, the amount of credit you’re eligible for may also change. Reporting these changes to the marketplace ensures that you’re receiving the correct amount of financial assistance.

8.2. What Changes to Report

You should report any changes that could significantly impact your household income, including:

Job Loss: If you lose your job, your income will likely decrease, which could make you eligible for a larger premium tax credit.
New Job: If you start a new job, your income will likely increase, which could reduce the amount of premium tax credit you receive.
Pay Raise: If you receive a pay raise, your income will increase, which could reduce the amount of premium tax credit you receive.
Change in Hours: If your work hours change, your income will likely change as well.
Self-Employment Income Changes: If you’re self-employed, report any significant changes in your business income or expenses.
Changes in Household Size: If you get married, divorced, or have a child, your household size will change, which can affect your eligibility for financial assistance.
Changes in Dependent Status: If a dependent moves out of your household or becomes ineligible to be claimed as a dependent, you should report this change.
Other Income Changes: Report any other changes that could affect your income, such as changes in investment income, rental income, or Social Security benefits.

8.3. How to Report Changes

You can report changes in income to the marketplace in several ways:

Online: Log in to your account on the Health Insurance Marketplace website and update your income information.
By Phone: Call the Marketplace Call Center and speak to a representative.
In Person: Visit a local enrollment center or navigator organization.

8.4. When to Report Changes

It’s best to report changes in income as soon as possible after they occur. This will help ensure that you’re receiving the correct amount of premium tax credit and avoid any surprises when you file your taxes.

8.5. Reconciling Premium Tax Credits

When you file your taxes, the IRS will reconcile the amount of premium tax credit you received during the year with the amount you were actually eligible for based on your actual income. If you received too much credit, you may have to pay back some of the excess when you file your taxes. If you received too little credit, you may be eligible for an additional tax refund.

8.6. Avoiding Penalties

Failing to report changes in income to the marketplace can result in penalties. If you intentionally provide false information or fail to report changes in income, you may be subject to fines or other penalties.

8.7. Resources for Reporting Changes

Several resources are available to help you report changes in income to the marketplace:

Healthcare.gov: The official Health Insurance Marketplace website provides detailed information on reporting changes in income.
Marketplace Call Center: Call the Marketplace Call Center for assistance with reporting changes.
Local Enrollment Centers: Visit a local enrollment center or navigator organization for in-person assistance.

9. Estate Taxes vs. Income Taxes

Understanding the distinction between estate taxes and income taxes is crucial for managing inherited assets effectively. While inheritances are generally not subject to income tax, they may be subject to estate taxes.

9.1. Estate Taxes

Estate taxes are taxes levied on the transfer of property from a deceased person to their heirs or beneficiaries. These taxes are typically paid by the estate before the assets are distributed to the heirs.

9.1.1. Federal Estate Tax

The federal estate tax is a tax on the transfer of assets from a deceased person to their heirs. The federal estate tax has a high exemption amount, which means that only very large estates are subject to the tax.

9.1.2. State Estate Taxes

Some states also have estate taxes. The state estate tax exemption amounts vary by state.

9.1.3. Who Pays Estate Taxes?

Estate taxes are paid by the estate of the deceased person, not by the heirs or beneficiaries.

9.2. Income Taxes

Income taxes are taxes levied on income earned by individuals and businesses. Income includes wages, salaries, self-employment income, investment income, and other sources of revenue.

9.2.1. Federal Income Tax

The federal income tax is a tax on income earned by individuals and businesses in the United States.

9.2.2. State Income Tax

Most states also have income taxes. The state income tax rates and rules vary by state.

9.2.3. Who Pays Income Taxes?

Income taxes are paid by the individuals and businesses who earn the income.

9.3. Key Differences

Here’s a table summarizing the key differences between estate taxes and income taxes:

Feature	Estate Tax	Income Tax
What is Taxed	Transfer of property from a deceased person to their heirs	Income earned by individuals and businesses
Who Pays	The estate of the deceased person	The individuals and businesses who earn the income
Tax Rate	Varies depending on the size of the estate and the applicable tax laws	Varies depending on the income level and the applicable tax laws
Exemption Amount	High exemption amount, meaning that only very large estates are subject to the tax	Varies depending on filing status and other factors
Frequency	Levied only upon the death of an individual	Levied annually
Resources for Understanding Estate Taxes and Income Taxes	Several resources are available to help you understand estate taxes and income taxes: IRS Publications: The IRS website provides detailed information on estate taxes and income taxes. Tax Professionals: Consulting a tax professional can provide personalized guidance and ensure accurate tax planning.	Several resources are available to help you understand estate taxes and income taxes: IRS Publications: The IRS website provides detailed information on estate taxes and income taxes. Tax Professionals: Consulting a tax professional can provide personalized guidance and ensure accurate tax planning.

9.4. Inheritance and Taxes

As previously discussed, inheritances are generally not subject to income tax. However, the assets in the estate may be subject to estate taxes before they are distributed to the heirs. Additionally, any income generated by inherited assets, such as rental income or dividends, is subject to income tax.

9.5. Tax Planning for Inherited Assets

Effective tax planning is essential for managing inherited assets. Consulting with a tax professional or financial advisor can help you understand the tax implications of your inheritance and develop a plan to minimize your tax liability.

9.6. Resources for Understanding Estate Taxes and Income Taxes

Several