Unemployed on Obamacare (FAQ): Do withdrawals from my IRA or 401k count as income?

Anastasia Iliou Affordable Care Act/Obamacare

What is considered income for Obamacare Subsidies?

Do you qualify for Obamacare Subsidies (tax credits)? Government-sponsored health care savings are based on your predicted household income for the following year (not your income from the past year). Household means that (in most cases), you, your spouse, and any dependents who live in your household are included, even if your family members don’t need insurance. Household income includes taxable wages, tips, self-employment money, unemployment income, most Social Security benefits, retirement or pension, alimony and child support, capital gains, and investment income. Gifts, Social Security Income (SSI), veteran disability payments, worker’s compensation, and gains from loans are not included in your household income.

If your income changes at any point, it’s important to report that to your insurance agent or update your application in healthcare.gov so that you don’t miss out on any cost savings you may be eligible for.

Is 401k withdrawal considered income for Obamacare?

It depends on the kind of account you’re withdrawing from. Generally, the amount of your income from a retirement account distribution depends on the type of retirement account, how much you contributed to it, and whether you were already taxed on the amount you contributed.

Withdrawals from a traditional IRA or SEP-IRA generally count as income. (If you made only tax-deductible contributions, all of it is considered income. If you made non-deductible contributions, see IRS Form 8606.)

Do Roth IRA distributions count as income for Obamacare?

Roth IRAs are different. Qualified withdrawals from a Roth IRA are not considered income. For more information, see IRS Publication 590.

Withdrawals from a 401k plan are generally counted as income (your pre-tax contributions, an employer’s matching contributions, as well as earnings, are included in income). But qualified distributions from a designated Roth account in a 401(k) plan are not considered income. For more information, see IRS publication 575.

If you are interested in an Obamacare Enrollment Alternative or an agent to assist in verifying your income, call (615) 541 -4257! We can set you up with a licensed agent in Tennessee who can help you find the best health care option for your needs. Don’t waste time – you could be saving money!


*This post was originally posted on February 4, 2014, by Ashley McNurlan. It was updated on November 20, 2018, by Anastasia Iliou.

Anastasia graduated from Belmont University with a Bachelor's degree in Songwriting. When she's not writing, she's on a mission to visit all 50 states in the U.S (and to date has reached 41). Anastasia loves writing music, hiking, and playing with her pets (hedgehog, cat, and dog). She loves animals (but not so much bugs) and spends her free time volunteering for The Elephant Sanctuary in Tennesee.