The government uses modified adjusted gross income (MAGI) to determine your eligibility for government health insurance programs like Medicaid, the Children's Health Insurance Program (CHIP), and premium tax credits.
The government deals with you in the context of your household. If you’re single and file taxes as an individual, you’re a household of one. If you have a family of four and file a single tax return for you, your spouse, your two dependents, you’re a household of four.
Your household income includes income from all of your household members.
To calculate MAGI:
- Find your annual gross income (GI)
- Find your annual adjusted gross income (AGI)
- Calculate your annual modified adjusted gross income (MAGI)
Find your annual gross income (GI)
Your household’s annual gross income is the total money your household members earned throughout the year. GI includes income from sources like wages and salary, interest, stocks, and rental properties. You can find your household’s AGI on line 7 of your tax return.
Find your annual adjusted gross income (AGI)
Once you have your household’s gross income, you "adjust" it to calculate your AGI. Your household’s AGI is your GI minus your tax deductions. AGI factors in deductions from expenses like IRA contributions and student loan interest. You can find your household’s AGI on line 8 of your tax return.
Calculate your annual modified adjusted gross income (MAGI)
Unlike GI and AGI, MAGI is not a line on your federal tax return. That means you’re going to have to crunch some numbers to calculate it. Your household’s MAGI is the total of the following:
- Your adjusted gross income (AGI)
- Excluded foreign income
- Nontaxable Social Security benefits
- Tax-exempt interest
For most households, MAGI is identical or very close to AGI.
