Modified Adjusted Gross Income under the Affordable Care Act - UPDATED WITH INFORMATION FOR COVID-19 POLICIES - UC Berkeley Labor Center (2024)

Part of the Labor Center’s Covid-19 Series: Resources, Data, and Analysis for California
Originally published July 2014; Updated March 2021

Under the Affordable Care Act, eligibility for income-based Medicaid[1] and subsidized health insurance through the Marketplaces is calculated using a household’s Modified Adjusted Gross Income (MAGI). The Affordable Care Act definition of MAGI under the Internal Revenue Code[2] and federal Medicaid regulations[3] is shown below. For most individuals who apply for health coverage under the Affordable Care Act, MAGI is equal to Adjusted Gross Income. This document summarizes relevant federal regulations; it is not personalized tax or legal advice. Consult the Health Insurance Marketplace for your state, your local Medicaid agency, or a legal or tax advisor for assistance in determining your MAGI.

Modified Adjusted Gross Income (MAGI) =

Adjusted Gross Income (AGI) Line 11 on Form 1040 See below for clarifications related to common benefits or sources of assistance provided during the COVID-19 pandemic

Include: Wages, salaries, tips, etc. Taxable interest Taxable amount of pension, annuity or IRA distributions and Social Security benefits[4] Business income, farm income, capital gain, other gains (or loss) Unemployment compensation Ordinary dividends Alimony received under settlements executed before 2019 Rental real estate, royalties, partnerships, S-corporations, trusts, etc. Taxable refunds, credits, or offsets of state and local income taxes Other income

Deduct: Certain self-employed expenses[5] Student loan interest deduction IRA deduction (traditional IRAs) Moving expenses for active members of the military Penalty on early withdrawal of savings Health savings account deduction Alimony paid under settlements executed before 2019 Certain business expenses of reservists, performing artists, and fee-basis government officials Educator expenses

Note: Check the IRS website for detailed requirements for the income and deduction categories above. Do not include Veterans’ disability payments, workers’ compensation or child support received. Pre-tax contributions, such as those for child care, commuting, employer-sponsored health insurance, flexible spending accounts and retirement plans such as 401(k) and403(b), are not included in AGI but are not listed above because they are already subtracted out of W-2 wages and salaries.

+

Add back certain income

Non-taxable Social Security benefits[6] (Line 6a minus Line 6b on a Form 1040) Tax-exempt interest (Line 2a on Form 1040) Foreign earned income & housing expenses for Americans living abroad (Form 2555)

	For Medicaid eligibility
–	Exclude from income	Certain American Indian and Alaska Native income derived from distributions, payments, ownership interests, real property usage rights, and student financial assistance

Modified Adjusted Gross Income and COVID-19 relief policies

Which common benefits or sources of assistance provided during the COVID-19 pandemic are included in calculating MAGI for purposes of determining health insurance program eligibility?

This table addresses common benefits and sources of assistance, including select provisions in federal policies enacted in response to the COVID-19 pandemic as of March 19, 2021. This document is not personalized tax or legal advice. Consult the Health Insurance Marketplace for your state, your state Medicaid agency, or a legal or tax adviser for assistance in determining your MAGI.

Endnotes

[1] Medicaid eligibility is generally based on MAGI for parents and childless adults under age 65, children and pregnant women, but not for individuals eligible on the basis of being aged, blind, or disabled.
[2] 26 CFR 1.36B-1(e)(2)
[3] 42 CFR 435.603(e)
[4] “Social Security benefits” includes disability payments (SSDI), but does not include Supplemental Security Income (SSI), which should be excluded.
[5] Deductible part of self-employment tax; SEP, SIMPLE, and qualified plans; health insurance deduction. See IRS Publication 974 for further details about calculating the deduction for tax households that also receive ACA premium tax credits.
[6] “Social Security benefits” includes disability payments (SSDI), but does not include Supplemental Security Income (SSI), which should be excluded.