Read this guide to help you learn how MAGI income is counted for determining eligibility for Medicaid and other healthcare programs. Different methods are used depending on the program.
Modified Adjusted Gross Income (MAGI)
Most Medicaid eligibility pathways use Modified Adjusted Gross Income (MAGI) to determine eligibility:
- What is MAGI? MAGI is a household’s adjusted gross income plus these additions:
- Untaxed foreign income
- Non-taxable Social Security benefits
- Tax-exempt interest
- Who Uses MAGI? MAGI is used to determine eligibility for:
- Advance payments of the premium tax credit (APTC)
- Cost-sharing reductions (CSRs)
- Certain Medicaid eligibility groups
- The Children’s Health Insurance Program (CHIP)
- MAGI does not appear as a line on consumers’ tax returns. Unless someone is receiving Social Security benefits, it is often identical or very close to a household’s adjusted gross income.
Whose Income to Include
Household size and composition are important factors when calculating MAGI and may differ between Marketplace and Medicaid/CHIP calculations.
Marketplace Tax Households
For APTC and CSRs eligibility:
- Individuals who appear together on the same tax return are in the same tax household
- The basic equation: Tax Household = Tax Filer + spouse + tax dependents
- Include spouse if legally married and filing jointly
- Include anyone claimed as a tax dependent for the coverage year
- Include spouse and tax dependents even if they don’t need health coverage
Medicaid and CHIP Tax Households
A Medicaid/CHIP household is generally the same as a tax household, with some exceptions:
- A spouse is included if spouses live together but aren’t on the same tax return
- Pregnant women’s household size is increased based on the child(ren) she is carrying
- Special non-filer rules apply for:
- Consumers who don’t file federal taxes and won’t be claimed as dependents
- Tax dependents claimed by non-parents or non-custodial parents
- Children living with two parents/step-parents who don’t file jointly
What Income is Counted
Taxable Income to Report
- Wages, salaries, bonuses
- Self-employment income
- Tips and gratuities
- All Social Security retirement and disability income
- Unemployment compensation
- Rent income
- Alimony received (for divorces finalized before 1/1/2019)
Income NOT to Report
- Temporary Assistance for Needy Families (TANF) payments
- Child support payments
- Supplemental Security Income (SSI)
- Veterans’ benefits
- Workers’ compensation
- Proceeds from loans
- COVID-19 economic impact payments
- Child tax credit payments
Deductions to Report
- Alimony paid (for divorces finalized before 1/1/2019)
- Student loan interest
- IRA contributions (if no retirement account through job)
- Educator expenses
- Limited charitable contributions (as allowed by IRS rules)
Deductions NOT to Report
- Child or dependent care expenses
- Charitable contributions above certain limits
- Mortgage interest
- Child support payments
- Property taxes
- Tuition costs
- Alimony paid (for divorces finalized after 1/1/2019)
Special Considerations
Non-taxable Income
A few non-taxable income types are included in MAGI:
- Non-taxable Social Security benefits
- Tax-exempt interest
- Excluded foreign income
Medicaid and CHIP Specific Rules
Medicaid and CHIP use current monthly household income and exclude:
- Certain scholarship income
- Certain tribal income
- Federal Pandemic Unemployment Compensation (2020-2021)
Income of Children and Tax Dependents
- A tax dependent’s income only counts if they’re required to file their own tax return
- The filing threshold depends on the type of income the dependent receives
- Income counting rules are the same whether or not they plan to file
American Indians and Alaska Natives
Many types of AI/AN income are excluded from MAGI calculations:
- Distributions from Alaska Native Claims Settlement Act Corporations
- Distributions from trust/reservation property
- Income from hunting, fishing, and natural resources rights
- Income from cultural/subsistence property
- Certain student financial assistance
- Income within the IRS General Welfare Doctrine
Variable Income
For households with unpredictable income (self-employed, commission-based, etc.):
- Base estimates on past experience and known future changes
- Consider recent trends and similar situations
- Update the Marketplace if income changes after application
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