I am self-employed and my income varies from year to year. How do I apply for premium tax credits if I don’t know what my income will be next year?

When you apply for the premium tax credit, you will be asked to estimate your expected income for the upcoming year. Often a good place to start is to consider what your income is this year, or what income you reported on your tax return last year. However, if your circumstances have changed since then, you should make your best estimate of what your income will be next year. For example, if you recently lost your job, you might estimate having less income and would include any unemployment benefits you expect to collect. Click here for more information on how to estimate your expected income.

The health insurance Marketplace will compare your income estimates against records at the Internal Revenue Service, Social Security Administration, and other sources. If the income amount shown on that official record is more than 50% or $12,000 higher (whichever is greater) than the amount you put on your application, you might receive a data match inconsistency notice from the Marketplace, and you’ll need to provide more documentation. Click here for examples of what types of documents are accepted to help verify income.

If you don’t have that documentation handy, the Marketplace will provide the tax credits for up to 90 days while you gather and submit your documentation for verification. It is very important that you provide any documentation requested by the Marketplace in a timely manner; if you don’t, your tax credits might be reduced or terminated.

Keep in mind that if you estimate your income incorrectly and end up with more financial assistance than you are eligible for, you will have to repay all of the extra premium tax credit paid on your behalf when you file your income tax the following year. If you overestimate your income and end up with less financial assistance than you are entitled to, the difference will be refunded to you when you file your income taxes the following year.

State-based Marketplaces may have their own standards for estimating income and timelines for submitting documentation to resolve a data match inconsistency. Click here to find the Marketplace in your state.