What income sources are included when calculating MAGI for ACA subsidies?
Executive summary
MAGI for ACA premium tax credit (subsidy) purposes starts with your federal adjusted gross income (AGI) and then adds untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest — those are the explicit add‑backs the Marketplace uses to get to ACA MAGI (HealthCare.gov glossary; Marketplace “What’s included” page) [1] [2]. Most people’s MAGI equals or is very close to AGI; pre‑tax deductions such as employer‑paid health premiums, 401(k) deferrals, and FSA contributions generally do not count as income for MAGI [1] [3].
1. What the government actually defines as MAGI for the Marketplace
The federal Marketplace defines MAGI as AGI from your tax return plus three categories when they apply: untaxed foreign income, non‑taxable Social Security benefits, and tax‑exempt interest. HealthCare.gov’s glossary and the Marketplace “What’s included” guidance state that MAGI is “AGI plus these, if any,” and that for many people MAGI will match or be very close to AGI [1] [2].
2. Practical examples and why this matters to subsidies
Because the subsidy formula uses your MAGI to place you relative to the federal poverty level and to compute the premium tax credit, including untaxed foreign income, non‑taxable Social Security, and tax‑exempt interest can noticeably raise the figure that determines subsidy size. HealthInsurance.org and state exchange explainers show that adding those items can move households across eligibility thresholds and alter subsidy amounts [4] [5].
3. What is NOT counted: pre‑tax deductions and employer pretax benefits
Multiple Marketplace and policy guideposts make the same point: wages reduced by pre‑tax employer deductions (health premiums, retirement plan contributions like 401(k), and flexible spending accounts) are not counted toward MAGI because those amounts are not taxed and do not appear in AGI [3] [2]. HealthInsurance.org and other explainers also note HSA and pre‑tax retirement contributions can reduce your ACA‑specific MAGI and therefore increase subsidy eligibility in practice [4] [6].
4. Lump sums, Social Security and timing differences
The Marketplace rules and other explainers point out differences in how lump‑sum amounts may be treated by Medicaid versus Marketplace subsidy calculations: Medicaid may count a lump sum only in the month received, while the Marketplace counts annual income — which matters for subsidies that use projected annual MAGI [4] [7]. HealthInsurance.org highlights lottery or large gambling winnings exceptions where very large sums may be spread over months under particular rules [4].
5. Household income rules and who’s included
The MAGI method determines household income for both Marketplace subsidies and most Medicaid eligibility categories; guidance clarifies that dependents’ MAGI can be included if they have a tax filing requirement and that MAGI is the consistent methodology used by both programs [3] [1]. KFF and Marketplace calculators prompt applicants to include wages, interest, dividends, Social Security, and “certain other income sources” when estimating household MAGI for subsidy projections [7].
6. Policy context and practical tips for applicants
Analysts and consumer guides emphasize that since MAGI is largely AGI‑based, tax planning moves that change AGI (retirement contributions, HSA contributions, self‑employed health insurance deductions) can alter subsidy eligibility and amount; HealthInsurance.org and HealthInsurance.org’s FAQ note these deductions can reduce ACA MAGI [4] [8] [6]. The KFF calculator warns that Marketplace verifications can differ from your estimate and that state agencies may verify income against prior‑year data [7].
7. Limitations in available sources and unresolved questions
Available sources do not mention every exotic income source (for example, whether certain pandemic‑era payments or very new legislative changes alter MAGI treatment beyond the cited documents); they also do not provide a single exhaustive checklist covering every edge case. For personalized situations, the sources recommend consulting a tax professional, your state Marketplace, or Medicaid agency for verification [8] [7].
Bottom line: for ACA subsidies, start with AGI and add only untaxed foreign income, non‑taxable Social Security, and tax‑exempt interest to get MAGI; employer pre‑tax deductions typically reduce AGI and therefore reduce MAGI, which can improve subsidy eligibility [1] [3] [4].