WindowWhat is Modified Adjusted Gross Income (MAGI)?

If you're not a tax accountant, Modified Adjustment Gross Income is one of those terms that you try to avoid until tax time.  Health reform will change all of that shortly.    MAGI is about to be a critical issue and a questions we're all going to face to see if we qualify for 1000's of dollars in health subsidies.  That probably got your attention.  So what is Modified Adjusted Gross Income and how will it affect your ability to qualify for health subsidies?

A simple definition of Modified Adjusted Gross Income (MAGI)

MAGI is essentially your gross income plus passive, tax-exempt interest, and foreign income.  For most people, it will be line 37 and 8b on the 1040 (bottom of page 1 after limited set of deductions).    It's important to look at what doesn't figure into the MAGI since there are major deductions that are not allowed and will push many people on the dividing line out of eligibility.

Common deductions that don't figure into MAGI

Your Schedule A deductions (the big one being home mortgage) does not come out of your MAGI.   Personal exemptions for family members also does not figure into this calculation.  We really need to look at your Gross income for MAGI.  There are some deductions that figure in (bottom of page 1 of 1040; line 23-35) that reduce your total Gross Income in order to get to your Adjusted Gross Income. 

From Adjusted Gross Income to Modified Gross Income

The modified aspect of the MAGI deals with what we add back in.  Tax-exempt interest is added to the AGI at this step. 

So why does the MAGI matter?

It's huge in the health reform scheme.  Here's the important factor:  If your MAGI is less than 400% of the Federal Poverty Level, you may qualify for the new health subsidy effective Jan 1st, 2014.  This amounts to $1000's a year for a person purchasing the California Silver Health Exchange plan.  In many cases, a person or family's premium will drop by more than half which is huge.  You can use our Health Subsidy Calculator to see what you may qualify for now and starting October 1st, 2013, we'll be able to actually run quotes here including the effect of subsidies if available.

Make sure to contact your licensed accountant for confirmation of your MAGI.

Popular Related Pages:

400% of Federal Poverty Level
Look Back Period for Subsidy


Los Angeles, Family of 4
making $60K.

Iowa, Single Adult making $30K

*Based on age, expected costs, and other assumptions according to Kaiser Calculator.  Actual subsidies will vary and official subsidy amounts will be available Oct 1st, 2013. 

Health Subsidy Calculator



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