My husband is disabled and gets $1,008 per month. We sold our business last year but we are getting our last payment of $36,000 this year. Do we have to claim this as income? I should make around $30,000 this year. Do I put income as $42,000 or $78,000?
Early Retiree in Missouri
Dear Early Retiree in Missouri,
Profits – not the whole amount of the sale — from a business sale would be considered income. They would be a capital gain (or loss) against the business asset that you sold. So, if you sold your business for $5,000 and your up-front investment was $3,000, then $2,000 would go into your income for the year. So, for the year that you sell the business, you will have a higher income than usual due to the profit (if you in fact make a profit from the sale).
You can estimate your income for your health insurance subsidy, and then report changes in mid-year. The exchange is supposed to be able to adjust your subsidy in mid-year, as your income rises or falls. I say “supposed to” because these systems are all new and untested. This may be a great deal more difficult than we might hope. You can decide whether you are better off under-estimating your income and getting more subsidy, which you may have to pay back later. The alternative is to over-estimate your income and perhaps get some of your subsidy as a tax refund, when you file your taxes.
I definitely would suggest consulting an accountant on these matters.
Special thank-you to Seth Shields, Hammond & Dargis Certified Public Accountants, for helping with this answer.