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What is Modified Adjusted Gross Income (MAGI) ?

Posted by Lisa Liu | Feb 27, 2024 | 0 Comments

What is Modified Adjusted Gross Income (MAGI) 

MAGI is based on your total Adjusted Gross Income, which is your total income minus certain allowable deductions (such as contributions to a traditional IRA or student loan interest).

The total annual income includes both the most earned and unearned income.

  1. Earned Income (EI)

Salaries, wages, tips, professional fees, and other amounts you receive as pay for physical or mental work you perform. This can include things you get in exchange for work instead of wages, such as food, shelter, or other items. Funds received from any other source are not included.

  1. Unearned Income (UI)

Funds received from sources for which no paid work activity is performed.

  • Disability benefits such as SSDI, SSI, short-term disability insurance, and long-term disability insurance;
  • VA benefits;
  • Workers' Compensation;
  • Income from a trust or investment;
  • Spousal support; 
  • Dividends, profits, or funds received from any source other than work are all usually considered unearned income. 

MAGI includes:

  • Wages, salaries, tips, and other earned income;
  • Taxable interest, dividends, business income, and capital gains;
  • Social Security Disability Insurance (SSDI) benefits and Social Security retirement benefits of people who file taxes;
  • Unemployment compensation; and
  • Most other types of taxable income.

MAGI does not include:

  • Supplemental Security Income (SSI), CalWORKs, CalFresh, and veterans' disability benefits;
  • Workers' compensation;
  • Earned income that is placed in a 401(k) plan or Individual Retirement Account (IRA) (Income placed in Roth versions of these accounts is included in MAGI.);
  • Pre-tax deductions from a paycheck, including contributions to health savings accounts (HSAs) and flexible spending accounts (FSAs);
  • Child support received; and
  • Most other types of non-taxable income.

MAGI is a measure used by the Internal Revenue Service and various federal programs, including Medicaid (Medi-Cal, in California) and the Affordable Care Act (ACA) health insurance marketplace, to determine eligibility for certain benefits and tax credits.

In California, MAGI is used to help determine eligibility for income-based Medi-Cal and for subsidies that help households pay for individual health coverage on Covered California. 

About the Author

Lisa Liu

Attorney Lisa Liu is the founder of LL Law Firm. Established with a mission to enhance family protection through quality legal services in family-centered matters, LL Law Firm strives to be your trusted and accessible community legal resource in the community. Drawing from her years of experience...

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