Modified Adjusted Gross Income for ACA (MAGI)

Modified Adjusted Gross Income (MAGI) for ACA purposes equals your Adjusted Gross Income (AGI) from your tax return plus three additions: tax-exempt interest income, non-taxable Social Security benefits, and excluded foreign earned income. For most people, MAGI is very close to AGI. MAGI is calculated at the household level (all tax filers in the household), not individual level. It determines both your eligibility for premium tax credits (100-400% FPL) and the size of your subsidy through the applicable percentage table. Common strategies to lower MAGI include maximizing traditional 401(k) or IRA contributions, making HSA contributions, and timing capital gains realizations. Self-employed individuals face a circular calculation because the self-employed health insurance deduction reduces MAGI, which affects the subsidy, which affects the deduction.