Modified Adjusted Gross Income (MAGI) is the income figure used by the federal government to determine your eligibility for ACA Marketplace subsidies and Medicaid. It starts with your Adjusted Gross Income (AGI) from your tax return and adds back certain deductions.
MAGI includes:
MAGI does not include child support received, gifts, or inheritances.
Why it matters for health insurance: your MAGI relative to the Federal Poverty Level (FPL) determines whether you qualify for a Premium Tax Credit, Cost-Sharing Reductions, or Medicaid. Reducing MAGI through pre-tax contributions — like maxing your 401(k), HSA, or traditional IRA — can move you into a more favorable subsidy tier or keep you below the subsidy cliff.
Not exactly. Your AGI is the starting point, but MAGI adds back certain items that AGI excludes — like tax-exempt interest, foreign income exclusions, and non-taxable Social Security. For most W-2 earners, the two figures are the same or very close. For self-employed individuals or those with investment income, they may differ. Your tax software or accountant can calculate the exact figure.
Yes. Contributions to a traditional 401(k), traditional IRA, or Health Savings Account (HSA) reduce your taxable income, which lowers your MAGI. A lower MAGI can increase your Premium Tax Credit or help you stay under the 400% FPL subsidy cliff. This is one of the most practical ways to optimize your health insurance costs if your income is near a threshold.
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