Obamacare – Profit from business sale counts as income

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. 

Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.