How the ACA Determines Your Income for Health Insurance
What is MAGI?
The Affordable Care Act (ACA) uses a modified adjusted gross income (MAGI) to determine your eligibility for premium tax credits and cost-sharing reductions. MAGI is similar to your regular adjusted gross income (AGI) on your tax return, but it has some important differences.
What’s the Difference Between MAGI and AGI?
One of the main differences between MAGI and AGI is that MAGI includes certain types of income that AGI does not. These include:
Tax-exempt interest income
Alimony received
Income from foreign trusts
Health savings account (HSA) contributions
MAGI also excludes some types of income that AGI does include, such as:
Student loan interest deductions
Tuition and fees deductions
Educator expenses deductions
How is MAGI Used for the ACA?
Your MAGI is used to determine:
Your eligibility for premium tax credits, which help you pay for your health insurance premiums
Your eligibility for cost-sharing reductions, which help you pay for your deductibles, copayments, and coinsurance
The amount of your premium tax credits and cost-sharing reductions
How to Calculate Your MAGI
To calculate your MAGI, you start with your AGI and then add back in any excluded income and subtract any excluded deductions. You can use the MAGI calculator on the Healthcare.gov website to calculate your MAGI.
Conclusion
MAGI is an important concept to understand if you’re enrolling in health insurance through the ACA. By understanding how MAGI is calculated, you can make sure that you’re getting the most out of your health insurance plan.
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