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Center for Labor Research and Education

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Modified Adjusted Gross Income under the Affordable Care Act


  • Summary

    Under the Affordable Care Act, eligibility for income-based Medicaid1 and subsidized health insurance through the Marketplaces is calculated using a household’s Modified Adjusted Gross Income (MAGI). The Affordable Care Act definition of MAGI under the Internal Revenue Code2 and federal Medicaid regulations3 is shown below. For most individuals who apply for health coverage under the Affordable Care Act, MAGI is equal to Adjusted Gross Income. This document summarizes relevant federal regulations; it is not personalized tax or legal advice. Consult the Health Insurance Marketplace for your state, your local Medicaid agency, or a legal or tax advisor for assistance in determining your MAGI.

    Modified Adjusted Gross Income (MAGI) =

    Adjusted Gross Income (AGI)

    Line 4 on a Form 1040EZ

    Line 21 on a Form 1040A

    Line 37 on a Form 1040

    Include:

    • Wages, salaries, tips, etc.
    • Taxable interest
    • Taxable amount of pension, annuity or IRA distributions and Social Security benefits4
    • Business income, farm income, capital gain, other gains (or loss)
    • Unemployment compensation
    • Ordinary dividends
    • Alimony received
    • Rental real estate, royalties, partnerships, S-corporations, trusts, etc.
    • Taxable refunds, credits, or offsets of state and local income taxes
    • Other income
    Deduct:

    • Certain self-employed expenses5
    • Student loan interest deduction
    • Educator expenses
    • IRA deduction (traditional IRAs)
    • Moving expenses
    • Penalty on early withdrawal of savings
    • Health savings account deduction
    • Alimony paid
    • Domestic production activities deduction
    • Certain business expenses of reservists, performing artists, and fee-basis government officials

    Note: Check the IRS website for detailed requirements for the income and deduction categories above. Do not include Veterans’ disability payments, workers’ compensation or child support received. Pre-tax contributions, such as those for child care, commuting, employer-sponsored health insurance, flexible spending accounts and retirement plans such as 401(k) and403(b), are not included in AGI but are not listed above because they are already subtracted out of W-2 wages and salaries.

    +

    Add back certain income

    • Non-taxable Social Security benefits4 (Line 20a minus 20b on a Form 1040)
    • Tax-exempt interest (Line on 8b on a Form 1040)
    • Foreign earned income & housing expenses for Americans living abroad (Form 2555)

    For Medicaid eligibility

    Exclude from income

    • Scholarships, awards, or fellowship grants used for education purposes and not for living expenses
    • Certain American Indian and Alaska Native income derived from distributions, payments, ownership interests, real property usage rights, and student financial assistance
    • An amount received as a lump sum is counted as income only in the month received

     

    Endnotes

    1. Medicaid eligibility is generally based on MAGI for parents and childless adults under age 65, children and pregnant women, but not for individuals eligible on the basis of being aged, blind, or disabled.
    2. 26 CFR 1.36B-1(e)(2)
    3. 42 CFR 435.603(e)
    4. “Social Security benefits” includes disability payments (SSDI), but does not include Supplemental Security Income (SSI), which should be excluded.
    5. Deductible part of self-employment tax; SEP, SIMPLE, and qualified plans; health insurance deduction. Note that the IRS states that “if you purchase coverage in the individual Marketplace and claim the premium tax credit on your tax return, the amount of the premium reimbursed by the credit may not also be deductible.”


  • Press Coverage

    Expanded Medicaid remains year-round option for many
    Detroit Free Press | December 7, 2014

    The Infinite Bewilderment of Signing Up for Obamacare Subsidies
    The Atlantic | November 5, 2013

    Confused by California’s Health Insurance Exchange? Here is Help
    Los Angeles Times | November 24, 2013

    Health Reform 101: What Counts as Income for Insurance Enrollment?
    WebMD | November 14, 2013

    Defining Line Between Medi-Cal, Exchange Policy
    San Francisco Chronicle | October 28, 2013

    Managing Poverty Income to Get a Health Subsidy
    San Francisco Chronicle | October 15, 2013

    What you Need to Know NOW as Obamacare Debuts
    Center for Health Reporting | October 15, 2013

    Lower 2014 Income Can Net Huge Health Care Subsidy
    San Francisco Chronicle | October 12, 2013

    Navigating the Affordable Care Act’s Tax Credit Maze
    Chicago Tribune | September 27, 2013

    Help! What can Obamacare do for me now?
    Center for Health Reporting | July 30, 2013