How to Calculate Your 2024 Income for Health Insurance
At Stride, we’re always looking for ways to make your health insurance more affordable. That’s why we want to help you understand the most important factor in calculating how much your insurance should cost: your income. But how do you calculate your total expected taxable household income?
Whether you recently lost employer-based coverage and are looking to enroll or just need a refresher, keep reading to learn how to calculate your 2024 income for health insurance.
Already know what your 2024 income will be? You’re ready to start comparing plans. Enter your zip code below to get started.
To buy health insurance for 2024, you need to estimate your 2024 total expected taxable household income. Your income determines how much you can receive in subsidies that could help offset the cost of your coverage. But predicting income can be pretty tricky when you’re self-employed: When you set your own hours, it’s hard to predict what those hours will be for an entire year.
For self-employed workers, business and personal deductions play a huge role in calculating income. The more business deductions you have, the lower your income.
For example, let’s say you know that you received about $51,000 from driving for Uber last year, so you use that number as your estimated 2024 income.
Not bad, right? But that’s based on your entire earnings from 2023. You’ve had expenses, too, right? And that means your true income is lower than $51,000. That’s why the income amount that we’re looking for is your MAGI (Modified Adjusted Gross Income), not how much you’ll receive from Uber next year.
Where This Number Comes From
Let’s talk a bit about how to calculate your MAGI to better predict your total expected taxable household income.
Finding Your Business Profit
You estimate you’ll receive about $51,000 from driving for Uber next year. But you also have to spend a lot of money in order to be a driver on things like cell phone data, passenger goodies, car cleaning, mileage, and a whole lot more. When you’re tallying up your income, you should include your business profit. This is your total Uber income minus expenses.
The IRS calls these deductible purchases “ordinary and necessary expenses,” because they’re either ordinary for your industry, or they’re necessary in order to do your job. Every time you incur an ordinary and necessary expense, you can subtract that amount from your business income.
So you’ve made $51,000, but you’ve spent $2,000 on parking fees, water bottles for passengers, a Spotify subscription, and your cell phone bill. You’ve also been tracking your mileage, and know you’ve driven about 15,267 miles this year for rideshare. Well, you get $.655 for every mile that you drive for your self-employment job, so you get another $10,000 tax deduction on top of that $2,000.
Now your business profit is $39,000.
If your self-employment job is your only source of income, you would use your business profit as your gross income (the sum of all of your sources of income).
How to Figure Out Your Adjusted Gross Income
AGI is all of your combined sources of income minus the stuff that you shouldn’t be taxed on. The IRS allows you to reduce your total taxable income with personal deductions, which are expenses that you have to pay that shouldn’t be included in your AGI.
Adjusted Gross Income = Total income - Personal deductions
A few examples of personal deductions are:
Student loan interest
Self-employed health insurance payments
IRA contributions
50 percent of self-employment taxes
Expenses like the ones above should be subtracted from your gross income.
So let’s say your business profit is $39,000 like we calculated above. Let’s also say you make IRA contributions of $5,200 every year. Because IRA contributions are a personal deduction, you can subtract the amount that you pay in contributions from your gross income. Now your AGI is $33,800!
How to Calculate Your MAGI (Modified Adjusted Gross Income)
MAGI is your AGI, plus a few other additions and subtractions (like non-taxable Social Security benefits, tax-exempt interest, and foreign income). In most cases, your AGI is the same as your MAGI.
MAGI = Adjusted Gross Income + A little something extra
So if your AGI is $33,800, and you don’t need to add in the forms of income listed above, you’ll calculate your 2023 income (aka MAGI) at $33,800.
Your health plan price will vary because you’ll have your own MAGI, zip code, household size, and other factors.
Here’s our point: The money you earn is not the same as your MAGI. So when you take time to calculate your 2024 income for health insurance correctly, you’ll make sure you don’t overpay for health insurance.
That’s how business deductions can come into play when 1099 paychecks are your only source of income. But what happens when you have more than one independent worker job, or have W-2 income as well?
Calculating Your Income With Multiple 1099s
The process of calculating your 2024 income is more or less the same when you have more than one 1099, but it involves a bit more math.
For example: You’ve been working for Postmates for a few years and started driving for Uber a few months ago to make some extra cash. You know you’ll keep driving for Uber all year next year, but don’t have a year’s worth of paychecks to predict how much you’ll make in 2023, let alone how much you’ll subtract in business deductions.
No problem! We can estimate a year’s worth of income and deductions based on a few weeks or months of driving information.
If you have records of 1) how much you’ve made from Uber, and 2) how much you can deduct from that income, you can take an average income total and deduction total for a week or month and multiply it to equal one year of working.
Let’s say you typically make $500 per week with Uber, and you know that you typically spend $50 per week on deductible expenses. You also have been tracking that you drive about 300 miles per week, which comes out to a $196.50 weekly deduction (.655 x 300).
That means your typical weekly business profit is $253.50 ($500 - $50 - $196.50).
You can take that number and multiply it by the 52 weeks in 2023 to find your projected 2023 business profit! Now you know you’ll make about $13,182 in net profit from Uber.
But What If I Have W-2 Income Too?
We’ve got your back. If you work part-time or full-time at a job, your gross income is calculated a little differently because your employer will withhold some of your taxes for you. That means that the money you take home isn’t necessarily the number to include in your income calculation.
Because gross income is your income before taxes, you’ll need to use your hourly rate to estimate your gross income, since that’s your income before your employer has withheld any taxes.
So let’s say you expect to make about $300 per week in business profit from Uber next year, and expect to work about 20 hours per week at a local restaurant earning a minimum wage of $7.25 per hour.
Your weekly income from the restaurant would be $145 ($7.25 x 20), and your weekly profit from Uber would be $300, earning you a total of $445 per week. Multiply that by 52 weeks, and you’ve got your 2023 gross income of $23,140.
Looking for a 2024 Health Plan?
Once you know your MAGI, enrolling in health insurance is quick and easy. Make it even quicker by getting customized plan recommendations right here on Stride.
Enter your zip code below to get started.
A Few Extra Tips:
If you’ve filed taxes as a self-employed worker before (complete with business deductions), and expect to work about the same amount in 2024, the AGI you reported on your last tax return is the best estimate you can find.
When you’re predicting what your business deductions will be, you need proof! You might be asked to submit proof of income with your health insurance application. If you’ve been keeping track of your business deductions all year (via mileage logs, or Stride Tax, etc.), and you expect to work about the same amount in 2024 as last year, you can use the documentation for those deductions as proof.
More of an auditory learner? We’ve got you covered. Check out the video below!
