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What is Modified Adjusted Gross Income?

​The individual Health Insurance Marketplace application requires individuals to provide accurate income information to determine eligibility status for receiving advanced tax credits. The Marketplace determines tax credit eligibility to lower your monthly health insurance premiums by using your Modified Adjusted Gross Income (MAGI), which is not a specific line on your tax return. It’s important to understand how to calculate your Modified Adjusted Gross Income (MAGI) when applying for health insurance.

Your MAGI is the total of the following for each member of your household who’s required to file a tax return:

  • Your Adjusted Gross Income (AGI) on your federal tax return
  • Excluded foreign Income
  • Nontaxable Social security benefits
  • Tax-exempt interest received or accrued during the tax year
  • MAGI does not include supplemental Security Income (SSI)

How to estimate your MAGI:

First, calculate your adjusted gross income (AGI) from your IRS 1040 tax return form. Generally for most people, your AGI will be identical to your MAGI. The IRS uses MAGI to determine how much a person’s IRA contributions and tuition can be deducted from taxable income. Make adjustments if applicable to your AGI by properly adding back certain items.

  • Tax-exempt foreign income
  • Tax-exempt foreign Social Security benefits
  • Tax-exempt interest
  • Supplemental Security Income (SSI) is not included
  • Example deductions include foreign-housing elections, student loan deductions, IRA contribution deductions, rental losses, education costs

One of the most important aspects to managing your health insurance application is updating your current income. Consider things like pay raises, new jobs, or other employment changes while including changes for any spouse or dependents updates. Take advantage of your resources by consulting a tax professional or licensed insurance agent to help navigate these tax implications and penalties when applying for individual health insurance.

American Exchange is here to help you understand all of your health insurance options available both On and Off Exchange. If you have any questions feel free to contact one of our licensed enrollment specialists at any time.

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