Will You Be Eligible for A Government Subsidy When You Buy Health Insurance in 2014? Check out Your “Modified Adjusted Gross Income” (MAGI) –You May Be Pleasantly Surprised
Maggie Mahar comments on the Modified Adjusted Gross Income and how this may positively impact your eligibility for healthcare insurance on the state exchanges.
Before writing this post, I had no idea how to calculate my “Modified Adjusted Gross Income” (MAGI). But I did know that this is the number the IRS will use when deciding whether people purchasing their own insurance in their state’s online marketplace (a.k.a. Exchange) will qualify for a tax credit to help them cover their premiums.
This piqued my interest.
The first thing you need to know is that your modified adjusted gross income (MAGI) may well be lower than your gross income.
When calculating your MAGI, you can subtract certain items from your adjusted gross income including: student loan interest, certain moving expenses, contributions to an IRA, some self-employment expenses, and any alimony that you pay.
As a result, an individual grossing $50,000 (or a family of four with income of $98,000) might well discover that after they deduct these items from, their MAGI falls under the cut-off for subsidies ($45,960 for an individual, $62,040 for a couple, $78,120, for a family of three, $94, 200 for a family of four)
This is why, even if think you earn a few thousand too much to qualify for government help, you should ask whoever prepares your taxes about your MAGI—and perhaps think about upping your contribution to an IRA.
Kiplinger’s Kimberly Lankford, suggests other ways to lower your MAGI by “selling losing stocks or boosting business expenses to offset self-employment income.” But, she warns, “Be careful with moves that could boost that your MAGI and make it more difficult to qualify for the subsidy — such as converting a traditional IRA to a Roth.” .
Clearly MAGI is a tricky number. For more detail see this -page definition from UC Berkeley’s Labor Center. It is far and away the best, and clearest description of how to calculate MAGI that I have found.
Cross Posted from The Health Beat Blog, Maggie Mahar, Will You Be Eligible for a Government Subsidy . . .