What specific income types are excluded from MAGI when calculating ACA premium tax credits in 2025?
Executive summary
The ACA’s Modified Adjusted Gross Income (MAGI) for premium tax credit (PTC) purposes starts with a taxpayer’s adjusted gross income (AGI) and then adds back only three specific untaxed items: untaxed (excluded) foreign earned income, non-taxable Social Security benefits, and tax-exempt interest — meaning most other common non‑cash or pre‑tax items are not separately “added in” and therefore do not increase MAGI [1] [2] [3]. Routine pre‑tax deductions (employer health premiums, 401(k) contributions, flexible spending accounts, HSA contributions, etc.) are already excluded from AGI and therefore generally do not count toward MAGI used to determine 2025 premium tax credit eligibility [4] [5].
1. What MAGI for premium tax credits actually is — the baseline and the three add‑backs
For Marketplace subsidy calculations MAGI is defined as AGI from Form 1040 plus any untaxed foreign income excluded under IRC §911, plus nontaxable Social Security benefits (including certain railroad retirement Tier I benefits), and plus tax‑exempt interest; those three categories are the only routine items the federal guidance tells applicants to add back to AGI when determining PTC eligibility [1] [2] [3].
2. Which non‑taxed Social benefits are counted — SSDI yes, SSI no
Because the ACA definition treats “non‑taxable Social Security benefits” as an add‑back, Social Security Disability Insurance (SSDI) and other Social Security payments are included in MAGI even if not taxed, but Supplemental Security Income (SSI) is expressly excluded and should not be added into MAGI for PTC calculations [6] [1] [7].
3. Foreign income treatment — exclusions are reversed and therefore increase MAGI
U.S. taxpayers who excluded foreign earned income under the foreign earned income exclusion must add that excluded amount back into MAGI for Marketplace subsidy purposes; in short, the tax code exclusion does not exempt that income from counting toward ACA eligibility [5] [3] [1].
4. Tax‑exempt interest is counted, not ignored
Interest that is tax‑exempt for income tax purposes (for example, many municipal bond interest payments) is one of the specified add‑backs and therefore increases MAGI for premium credit calculations [1] [2].
5. Pre‑tax employer benefits and retirement contributions — why they typically don’t increase MAGI
Pre‑tax deductions such as employer‑sponsored health insurance premiums taken out of wages, retirement plan contributions (e.g., 401(k) deferrals), commuter or dependent care FSA contributions, and certain HSA contributions are generally already excluded from wages reported in Box 1 of Form W‑2 and so are not counted in AGI and therefore do not separately raise MAGI for the Marketplace subsidy calculation [5] [4] [8].
6. What MAGI often looks like in practice and why confusion persists
For many filers MAGI will be the same as AGI because most people do not have the specific add‑backs (untaxed foreign income, nontaxable Social Security or tax‑exempt interest); that alignment explains why MAGI is straightforward for many households but generates confusion when people encounter unique items like the foreign earned income exclusion or non‑taxed benefits [4] [1].
7. Caveats, limits of reporting and practical implications for 2025 subsidies
The sources show the statutory MAGI definition used to determine 2025 premium tax credit eligibility but do not substitute for individualized tax advice; for complex situations — multi‑state households, mixed filing statuses, excluded foreign wages, or unusual tax‑exempt income — professional tax or Marketplace help is advisable because the underlying tax return details (AGI adjustments and specific add‑backs) drive the final MAGI used to calculate subsidies [3] [4].