By Ryan Kennelly
July 26, 2016
Topics:
July 26, 2016
Modified Adjusted Gross Income (MAGI) is used to determine eligibility for premium tax credits and other savings for Marketplace health insurance plans and for Medicaid and the Children’s Health Insurance Program (CHIP). For many people, it’s identical to or very close to adjusted gross income.
Modified adjusted gross income is adjusted gross income plus these 3 kinds of income, if any:
MAGI includes these income sources for all household members required to file a tax return.
MAGI does not include Supplemental Security Income (SSI). Supplemental Security Income (SSI) is a monthly benefit paid by Social Security to people with limited income and resources who are disabled, blind, or 65 or older. SSI benefits aren’t the same as Social Security retirement or disability benefits.
MAGI does not appear as a line on your tax return.
When you fill out a Marketplace application, you’ll need to estimate what your household income is likely to be for the current calendar year.
For most people, a household consists of the tax filer, their spouse if they have one, and their tax dependents, including those who don’t need coverage.
The Marketplace counts estimated income of all household members who are required to file a tax return.
Learn more about who’s counted in a Marketplace household.
The Marketplace uses an income number called modified adjusted gross income (MAGI) to determine eligibility for savings. It’s not a line on your tax return.
The chart below shows common types of income and whether they count as part of MAGI. If you expect income types not shown or have additional questions, see details on what the IRS counts as income.
| Income type | Include as income? | Notes |
|---|---|---|
Federal Taxable Wages (from your job) | Yes | If your pay stub lists “federal taxable wages,” use that. If not, use “gross income” and subtract the amounts your employer takes out of your pay for child care, health insurance, and retirement plans. |
Tips | Yes | |
Self-employment income | Yes | Include “net self-employment income” you expect — what you’ll make from your business minus business expenses. Note: You’ll be asked to describe the type of work you do. If you have farming or fishing income, enter it as either “farming or fishing” income or “self-employment,” but not both. |
Unemployment compensation | Yes | |
Social Security | Yes | Include both taxable and non-taxable Social Security income. Enter the full amount before any deductions. Do not include Supplemental Security Income (SSI) |
Social Security Disability Income (SSDI) | Yes | But do not include Supplemental Security Income (SSI). |
Retirement or pension Income | Yes | Include most IRA and 401k withdrawals. (See details on retirement income in the instructions for IRS publication 1040). Note: Don’t include qualified distributions from a designated Roth account as income. |
Alimony | Yes | |
Child support | No | |
Capital gains | Yes | |
Investment income | Yes | Include expected interest and dividends earned on investments, including tax-exempt interest. |
Rental and royalty income | Yes | Use net rental and royalty income. |
Excluded (untaxed) foreign income | Yes | |
Gifts | No | |
Supplemental Security Income (SSI) | No | But do include Social Security Disability Income (SSDI). |
Veterans’ disability payments | No | |
Worker’s Compensation | No | |
Proceeds from loans (like student loans, home equity loans, or bank loans) | No |
Once you have Marketplace health insurance, it’s very important to report any income changes as soon as possible.
If you don’t report these changes, you could miss out on savings or wind up having to pay money back when you file your federal tax return for the year.
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