Under the Affordable Care Act, eligibility for income-based Medicaid and subsidized health insurance, such as Covered California, through the marketplaces is calculated using the modified adjusted gross income (MAGI) of your household. Let's take a look at how this MAGI is different then the Adjusted Gross Income found on your tax return.
The first thing to recognize is that your modified adjusted gross income is not the same thing as your total income, or as your adjusted gross income (AGI);
OK.. start by finding Your Adjusted Gross Income (AGI) - Your AGI is the total amount of income you make in a year, minus certain deductible expenses. The AGI is found on line 37 of IRS Form 1040, on line 21 of IRS Form 1040A, and on line 4 of IRS Form 1040EZ. The IRS is working on a new Form 1040 for the 2019 tax season. The location of your adjusted gross income may change, but the same concepts will apply in determining how to calculate your AGI.
Adjusted gross income includes all your income, including:
The total amount of income then is "adjusted" by subtracting tax-deductible expenses. These may include the following common deductions among the list:
The adjusted gross income is a starting point to calculate your total income tax. It also uses it to determine if you're eligible for a variety of credits and exemptions, including charitable deductions, deductions for adoption expenses, dependent tax credits, and the earned income credit, and beacuse of this... it's generally in your best interests to lower your AGI as much as possible, given your earnings. You should find as many tax-deductible expenses as possible to subtract from the total.
Now, on to How to Calculate Your MAGI
You won't find your modified adjusted gross income on your tax return. Fortunately, though, it's easy to calculate. Start with your adjusted gross income, the figure on the last line of the front of your 1040 or 1040A tax form (line 37 for Form 1040, line 21 for Form 1040A, or line 4 for Form 1040EZ). Then find yourself a calculator, and add back:
... so there you have it. Surely a difference from looking at your taxes and using the AGI.
As always, feel free to pass this Tip along to friends, and reach out if you need help with your personal tax and finance situation.