Image Image Image Image Image Image Image Image

Center for Labor Research and Education

About:

Scroll to top

Top

Modified Adjusted Gross Income under the Affordable Care Act



  • Updated July 2019

    Summary

    Under the Affordable Care Act, eligibility for income-based Medicaid[1] 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 Code[2] and federal Medicaid regulations[3] 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 7 on Form 1040

    Include:

    • Wages, salaries, tips, etc.
    • Taxable interest
    • Taxable amount of pension, annuity or IRA distributions and Social Security benefits[4]
    • Business income, farm income, capital gain, other gains (or loss)
    • Unemployment compensation
    • Ordinary dividends
    • Alimony received under settlements executed before 2019
    • 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 expenses[5]
    • Student loan interest deduction
    • IRA deduction (traditional IRAs)
    • Moving expenses for active members of the military
    • Penalty on early withdrawal of savings
    • Health savings account deduction
    • Alimony paid under settlements executed before 2019
    • Certain business expenses of reservists, performing artists, and fee-basis government officials
    • Educator expenses

    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 benefits[6] (Line 5a minus Line 5b on a Form 1040)
    • Tax-exempt interest (Line 2a on Form 1040)
    • Foreign earned income & housing expenses for Americans living abroad (Form 2555)
    For Medicaid eligibility

    Exclude from income

    • Certain American Indian and Alaska Native income derived from distributions, payments, ownership interests, real property usage rights, and student financial assistance

    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. See IRS Publication 974 for further details about calculating the deduction for tax households that also receive ACA premium tax credits.
    [6] “Social Security benefits” includes disability payments (SSDI), but does not include Supplemental Security Income (SSI), which should be excluded.

  • 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