How to calculate modified adjusted gross income for ACA applications?
Executive summary
MAGI for ACA purposes starts with your federal adjusted gross income (AGI) and adds back three categories: untaxed foreign income, non-taxable Social Security benefits (including SSDI but not SSI), and tax‑exempt interest (for example municipal bond interest) [1] [2]. For most households MAGI will be identical or very close to AGI, but the Marketplace and Medicaid use projected annual MAGI (not just monthly income), and some income rules differ between Medicaid and the Marketplace [1] [3] [4].
1. What MAGI actually is — the short formula that matters to applicants
For ACA eligibility, MAGI = your federal AGI (line shown on Form 1040) plus any untaxed foreign earned income you excluded, plus any non‑taxable Social Security benefits, plus any tax‑exempt interest income. HealthCare.gov and Marketplace guidance state this rule plainly and note MAGI is not a line on your tax return; you compute it from AGI plus those add‑backs [1] [5].
2. Where to find the starting number: your AGI
Your starting point is AGI on your Form 1040 (for example line 11 on recent 1040s), which most guidance tells you to locate before adding the specified items back in [6]. If you don’t have a filed return, Marketplace tools and calculators ask for estimated yearly income and will walk you through the items to include [3] [5].
3. The three add‑backs you must remember
HealthCare.gov and other ACA‑focused explainers repeatedly emphasize the same three additions: untaxed foreign income excluded under section 911, the full amount of Social Security benefits that are non‑taxable (includes SSDI; explicitly excludes SSI), and tax‑exempt interest such as muni bond interest [1] [2] [4]. UC Berkeley and other analyses also cite this definition when explaining Medicaid and Marketplace MAGI rules [7].
4. Why MAGI often equals AGI — but not always
For many people, MAGI and AGI are identical or very close because the three add‑backs simply don’t apply. But if you live abroad and excluded foreign earned income, receive non‑taxable Social Security benefits, or earn tax‑exempt interest, your MAGI will exceed AGI — and that increase can change subsidy and Medicaid eligibility [1] [8].
5. Projected annual income vs. current monthly income — a crucial practical difference
When applying for Marketplace subsidies you report expected annual MAGI for the coverage year; Marketplace calculators tell you to estimate your income for the upcoming year. By contrast, Medicaid often uses current monthly income rules in some contexts, and states have variation in how they apply MAGI methodology to certain eligibility categories — so timing and whether you use projected annual vs. current monthly income matters [3] [4].
6. How specific deductions and pre‑tax benefits factor in
Pre‑tax deductions taken from wages (such as employer‑sponsored health insurance premiums, 401(k) contributions, or FSA contributions) generally reduce your AGI because they are excluded from taxable wages, and Marketplace guidance and policy analyses note those pre‑tax reductions therefore lower MAGI as well. Sources caution, however, that different MAGI definitions are used for other programs (e.g., IRMAA, some IRA rules) so you should not assume one blanket definition applies to every federal program [4] [9].
7. Tools, calculators and when to consult a professional
KFF’s Marketplace calculator and HealthCare.gov’s online tools will walk you through estimating household MAGI using wages, interest, dividends, Social Security, and other income sources; they explicitly ask for your best guess of the upcoming year’s income [3] [5]. Several plain‑language guides and employer resources also show step‑by‑step MAGI calculations, but if you have complex elements (foreign exclusions, mixed‑status households, or unusual tax items) professional tax or enrollment help is recommended [2] [10].
8. Political and timing context that affects practical outcomes
Analysts note that subsidy levels and MAGI‑based thresholds have changed with legislation (for example American Rescue Plan enhancements through 2025) and that whether those policy changes are extended can materially affect who qualifies and how much they receive. That means the MAGI calculation is stable, but the dollar thresholds and program consequences tied to MAGI can shift with law and regulation [8] [9].
Limitations: available sources do not mention step‑by‑step worked numerical examples for a mixed‑income household within this packet, and they do not give state‑by‑state Medicaid MAGI implementation details — you must consult your state agency or HealthCare.gov tools for those specifics [3] [5].