How to Calculate MAGI (Modified Adjusted Gross Income) for Health Insurance
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- Опубліковано 28 лис 2024
- How do you calculate your MAGI (Modified Adjusted Gross Income) for Marketplace Insurance? Check out this video to learn more or call us at iHealthBrokers today at 888-410-0344. Our services are 100% Free!
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The first thing you need to understand is the difference between your AGI (Adjusted Gross Income) and your MAGI. Your AGI is very important for tax purposes. It’s basically your gross income minus deductions. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. You are able to either itemize your deductions or take the standard deduction. Once you’ve subtracted these deductions, you are left with your AGI. This is where you have a little wiggle room. If you are planning on enrolling on insurance through the marketplace, you may want to work with an accountant to ensure your AGI falls within the proper bracket within the marketplace. A lower income range may make you eligible for a premium tax credit.
These tax credits will give you a savings of several hundred per month or more dependent upon your household size. So, as far as affordability, eligibility for a premium tax credit makes a huge difference.
So, first and foremost you’re going to want to lower your AGI. Try talking to an accountant or possibly contributing to a Roth IRA. You may also be able to lower your AGI by picking the right health insurance plan. If you pick a plan with a Health Savings Account (HSA), you can contribute to that HSA and lower your AGI. In 2021, an individual can contribute a max of $3,600 to a Health Savings Account and a family can contribute a max of $7,200.
An HSA is your money in a special account. The account is interest bearing and that interest is tax free. As long as you use the money within your account, it is tax free. The money rolls over from year to year and if you hold on to the account until you are 65, you can convert it to a basic retirement account and use it for whatever you want.
BUT, they’re not for everyone. HSAs are a great financial option, but they are only available with high deductible health plans. Your deductible is the amount that you have to pay out of pocket before your insurance kicks in. Once you’ve met your deductible, your insurance will pay for a portion of the costs and you are responsible for copays and coinsurance. If you have major services, eventually, you may hit your out of pocket maximum and your insurance will pay 100% of the costs for covered benefits.
So, now that you understand AGI, how do you calculate MAGI? Honestly, for most people, the number is going to be the same! There are a few minor deductions to be added back which are detailed on healthcare.gov.
If your information should change at anytime, it is very important that you update Healthcare.gov. You can do so online, in person or via phone but NOT via mail. Should you have any changes to your income, household size or residency, your eligibility for a premium tax credit may change. Again, this may result in you leaving money on the table or having to pay those tax credits back come tax time!
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If you saw the title of this video and came here looking to learn how to calculate your MAGI, the information starts at around the 14:11 mark.
Thank you 😊
Great content, explained in very good detail. Thank you.
Our pleasure! Thank you for your comment.
Great information. Bottom line: live in poverty else get slammed on insurance premiums. Got it.
That's not entirely true, but we understand why you would feel that way.
MAGI is after the 401k and IRA contributions, right? Example, salary 60,000, 401 K contributions 15000, IRA 5000, then MAGI = 40,000.
I have this same question, and I have googled to try to find an answer, and I cannot...
Any pre-tax contributions (i.e. a traditional 401K) can lower your MAGI. However contributions that are after tax (i.e. Roth IRA) would have not effect on your MAGI. Thanks for your question!
Great content. So If I plan to do early retirement (62.5 yo) is there a better time of the year to do so? Next year my income will be WAY less than what it was this year. Oops, I just saw this was from 2021 but the question I think is still valid.
That's tricky because it depends on the income you are currently making. Let's say you're a higher earner, but you retire in February. That's still only two months of income (assuming you are going to have a much lower income once retired). That would make it likely that you would be eligible for a larger premium tax credit. But if you wait until much later in the year (perhaps September) you would have many more months of full income to calculate into your estimate. That could potentially count you out for a larger premium tax credit. However, if you are a lower earner or will still bring in a comparable income once retired, then it might not make as much of a difference. Good question and congrats on your soon to be retirement!
Quick question does Medicare pays negotiated charges to providers like my group insurance does
Yes, Medicare negotiates rates for specific services with doctors and hospitals. Some doctors choose to charge up to 15% more than the Medicare approved amount. These are called Part B excess charges. They are not very common, but something you should be aware of!
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Thanks
Hello here you mention (@2:47) that AGI is after itemized or standard deduction ($12,550 for singles filers and married filing separately, $25,100) subtracted from gross income but to me that sounds like taxable income not AGI. I am a bit confused. Shouldn't AGI be income before itemized/standard deduction is subtracted from gross income? I think you may be referring to tax deductible item such as HSA and Trad IRA contribution amount not itemized or standard deduction?
It can all be quite confusing. The IRS defines your AGI as as gross income minus adjustments to income (detailed in the video). For the purposes of health insurance, some deductions are added back to calculate your MAGI. Thank you for your comment!
The advice given to me regarding HDHP with an HSA is that they are great options if you are really healthy or really sick (chronic conditions). The trick is to ensure your maximum out of pocket from the insurance plan is covered by the HSA maximum savings for the year. If you get your HDHP through an employer, this normally isn't an issue. However, I'm considering going self employed in the next year and health insurance is the biggest factor holding me back. I'm already at work income replacement level with my side hustle and I think I could grow a lot more if I focused 100% on it - but, I have a family with pre-existing medical conditions. Until I can make a move, I'm saving up to have a bit of "run way" and building my side hustle slowly until it can cover 150% of my work income.
This sounds like a very smart plan, Jason. Heath insurance can be one of the biggest factors that prevent people from making the leap to self employment. If you need any assistance, please feel free to contact us. We can discuss all of the options available to you and your family to ensure you have adequate coverage while you make the switch. 888-410-0344. Best of luck to you!
for 2024, will contributing to a HSA make a difference as far as lowering my income for a plan through the government?
Going to need some more specifics. Are you talking about 2024 plans or 2025 plans? Contributing to your HSA in 2024, will not affect your premiums for a 2025 plan. However, if you enroll in a plan with HSA for 2025 and contribute, that would lower your MAGI. I hope that helps!
@@iHealthBrokers thanks! do the plans have to be HSA eligible to use the lower MAGI amount?
@@tomcarney-w5g Contributing to an HSA is just one way to lower your MAGI. It's the only one that we can really speak to in the health insurance sphere. If you need to lower your MAGI to qualify for a larger premium tax credit, definitely speak with a tax professional. They may be able to guide to towards some additional deductions pushing you into eligibility for a larger premium tax credit. Thank you for your question!
I am confused. Line 7 on my 2020 Form 1040 is Capital Gains (not AGI). I see ADJUSTED GROSS INCOME listed on line 11 and TAXABLE INCOME listed on line 15. I presume line 11 is what needs to be considered? BEFORE standard deduction is removed correct?
Are you completing a marketplace application?
@@iHealthBrokers No. I was just trying to calculate my anticipated MAGI prior to the end of the year.
@@straitjacketstudios This video is really about MAGI in relation to marketplace applications. We'd recommend speaking with an accountant for anything tax related. You can also reach out to our good friend Zach Smith @OnCashFlow!
What if you estimated an amount and got approved but then you ended up making less , putting you outside the lower bracket . Making less than 12,000 a year
Would you lose coverage ?
You won't lose coverage. If you end up making less money than you estimated when enrolling, you actually receive a larger tax refund. Thanks for your question!
Don't you have to make at least $14,000 a year to qualify for ACA? Up to $8,000 is Medicaid but Fl dosnt have expanded Medicaid so they'd be in a donut hole..
What happens if you over estimated your MAGI when filling out the form and need to make a change after submitting it and got approved for a set amount can you go back and change it or is it too late to make the change even when in a special enrollment period?
Great question! If you have an adjustment to your income, you can update it on healthcare.gov. Also, if you end up making less and are eligible for a larger premium tax credit, you should get that money back in the form of a refund when you file your taxes.
Medical is asking for N-MAGI-ILTR to re evaluate Medical to pay for Medicare. Is that the same as MAGI? If so, how do you get MAGI? A lot of people want to know how to get MAGI. Is there a form or website, dose Medicare send it to you or do we just send our tax return to Medical? It's not clear on any website government or other wise on how to get MAGI, they only say what it is and how to do it. People want to know where to get MAGI. If it was explained in this video it wasn't clear hence most of the comments on this thread.
Medicare is asking for your MAGI to reevaluate? Social security should notify you of your premium...Did you file IRMAA based on adjusted income? www.ssa.gov/forms/ssa-44-ext.pdf For more information on your MAGI, please see here: www.healthcare.gov/income-and-household-information/income/#magi
AGI is before you apply standard or itemized deduction .. Make sure you grasp the concept before you share. It can be harmful.
turbotax.intuit.com/tax-tips/irs-tax-return/what-is-adjusted-gross-income-agi/L2C6rCEit
This is what drives me crazy. They always refer to AGI from your Federal Tax return, however when trying to determine your status for the forthcoming year, you have not yet done your taxes so therefore need to require that you manually determine your AGI and ultimately your MAGI. That is the challenge that is rarely explained in any of these videos.
You're right. Many who utilize Healthcare.gov are freelancers and it can be difficult to estimate your income a year in advance. If you estimate incorrectly you'll either be reimbursed when you file or have to pay back the tax credit.
I have the same question two other commenters below had. Let me phrase it differently: in your example on healthcare.gov the MINIMUM income required to qualify for a plan under the ACA exchange is $17K. Since the standard tax deduction is $12K for an individual, are you saying your gross income must be at least $29K (29K gross minus $12K standard deduction = $17K income after standard deduction) to qualify for an ACS plan? That seems high to me. Thanks for clarifying.
Thanks for your question! To clarify, there is no minimum income required to qualify for ACA plans. There is no income requirement whatsoever for ACA plans. Your income only comes into play to determine eligibility for premium tax credits. In the example on the screen, if your MAGI were less than $17,240, you would receive information prompting you to investigate additional financial help and Medicaid options. However, even if your MAGI were, let's say, 15K, you could still apply for a marketplace plan. With an income on the lower spectrum (15K in our example) you would certainly qualify for a premium tax credit as well.
It took almost 15 minutes to get to MAGI and then it was not clear. Waste of time. Using my tax return, how do it get my MAGI? This is for Medicare premium planning.
We are health insurance brokers. So yes, our videos are tailored towards health insurance questions. Your taxes rely on your AGI not your MAGI.
Called your 1800 number and all brokers were unavailable for any phone calls and could only answer questions through email, not acceptable for me. Very no proactive and I also asked a question about why some health providers will not accept any form of market place insurance.
Also, this call was made on November 28th, 2023 and the soonest anyone could get back with me was December 12,2023. Also unacceptable…
That is the busiest time of year due to Medicare AEP as well as open enrollment. Most quality brokers book up well in advance. We hope you had a successful enrollment!
Does this really have to be a 20 minute video?
I could explain this to someone on under 2 minutes.
At least she is easy on the eyes. She's covering a lot of ground and doing so from a newbie perspective, which takes additional time. Explaining MAGI to someone in a few minutes might be possible if all the health insurance stuff was skipped. With online videos, you don't know the starting point of the person watching - so you either have to cover assumptions as a baseline or assume no prior knowledge.
My head is spinning from these acronyms. I wonder if it was made this complicated on purpose?
It may not have been on purpose, but it does seem extremely complicated!
Yes.lol. SMH🤦♂
If you say you are going to talk MAGI in your title then don't waste so much time on everything else wasting my time before you get to MAGI
Sorry you feel that way.