Do I Subtract My Health Insurance Premiums When I Calculate My MAGI for the ACA
When you are getting ready to apply for health insurance under the Affordable Care Act (ACA), you will need to know your Modified Adjusted Gross Income (MAGI). This is your income level that will determine if you qualify for premium tax credits to help you pay for your health insurance. You generally will provide MAGI information for the tax year before the year you apply for coverage.
What is MAGI?
MAGI is similar to your Adjusted Gross Income (AGI), which you calculate when you file your federal income taxes. However, MAGI includes some additional income that AGI does not. These additional forms of income include:
Nontaxable Social Security benefits
Tax-exempt Interest
Excluded foreign income and income from US possessions
Health Insurance Premiums
Unlike your AGI, MAGI does not include health insurance premiums. This means that you cannot subtract your health insurance premiums from your income when calculating your MAGI.
Example
For example, let’s say that your AGI for 2024 is $65,000. You also paid $10,000 in health insurance premiums in 2024. Your MAGI for 2024 would be $75,000 ($65,000 + $10,000).
Why is MAGI important?
Your MAGI is important because it determines if you qualify for premium tax credits to help you pay for your health insurance. If your MAGI is too high, you will not qualify for premium tax credits.
How to Lower Your MAGI
There are a few ways to lower your MAGI. These include:
Contributing to a retirement account, such as a 401(k) or IRA.
Making deductible contributions to a health savings account (HSA).
Claiming certain deductions and credits on your tax return, such as the student loan interest deduction or the child tax credit.
If you are not sure how to calculate your MAGI, you can use the MAGI calculator on the Healthcare.gov website:
[https://www.healthcare.gov/income-and-family-size-to-use-marketplace-plans
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