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What Is Modified Adjusted Gross Income (MAGI) in Health Insurance?
<lingo>MAGI refers to how much money you make per year after certain deductions have been made. Your MAGI is used to determine your savings for insurance plans, whether you're going through the Obamacare marketplace, the Children's Health Insurance Program, or Medicaid. The lower your MAGI is, the more you qualify for tax credits to reduce the premiums of your plan. When it comes to MAGI, you can only apply a limited number of expenses to reduce your income. These expenses include student loan interest, retirement-plan contributions, self-employment tax, and passive income.</lingo>
Modified Adjusted Gross Income (MAGI) Explained
Your Adjusted Gross Income (AGI) differs from your MAGI in that you can apply more deductions to it. The additional options theoretically give people more ways to save money on insurance, but in reality, AGI and MAGI tend to be fairly similar in value. Whether you file your own taxes or have an accountant do them though, it's important to know the rules for MAGI. Many of the deductibles are uncommon, so an accountant may not even realize that you're eligible for them. For example, if you earned any tax-exempt interest from a municipal bond that year, you can deduct this from your AGI.
<twitter>MAGI refers to how much money you make per year after certain deductions have been made.</twitter>
Your personal savings depend on the income you're expected to make for the year in which you apply and it's typically calculated based on the household income. So if you got a new promotion from last year to this year or purchased a new property, you'll need to factor in any additional income. Similarly, if you sustained heavy losses on a rental property for any reason, you can use this event to estimate how much lower your income will be for the year. When calculating the MAGI, the household includes the filer, their spouse, and any dependents they have. Even if your spouse doesn't need coverage, they should still be included in the estimate. If your income drastically changes during the year, you are allowed to contact your insurance provider to see if you're eligible for savings.
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