The Affordable Care Act (ACA) has introduced premium tax credits for you and your family will give a discount to buy a health insurance coverage by the health insurance market. If you qualify, these tax credits can reduce the cost of health insurance for your family does not exceed 9.5 percent or as low as two percent of your household income . Before you can calculate your tax credit on premiums, you must first calculate your adjusted modified gross income (MAGI).
Your MAGI is a measure used by the IRS to determine if you are eligible to use certain deductions, credits (including premiums tax credits), or pension plans. The eligibility for premium tax credits is based on whether your income is not more than 400% of the federal poverty line (FPL). "Modified adjusted gross income" (not "adjusted gross income"). Here is a quick overview of how to calculate your modified adjusted gross income.
What's adjusted gross income?
Generally your adjusted gross income (AGI) is income less various adjustments to your household. adjusted gross income is calculated before detailed or standard deductions, exemptions and credits are taken into account.
What is modified adjusted gross income?
Generally, your adjusted gross income change (MAGI) is the total adjusted gross income of your household and any tax-exempt interest income you may have (these are the amounts on lines 37 and 8b of IRS 1040).
How to calculate your gross income (GI)
your gross income is money you earned through wages, interest, dividends, rental and royalty income, capital gains, business income, farm income, unemployment and child support. This is the basis for the calculation of your AGI.
Gross income includes wages, interest earned, investment income, and basically any income you made through business, trade or investment.
Calculating your Adjusted Gross Income (AGI)
Once you have a gross income, you "adjust" to calculate your AGI. You make adjustments by subtracting allowable deductions from your gross income.
The adjustments may include items such as IRA contributions, expenses, alimony paid, self-employment taxes, and interest student loan move. There are many free AGI calculators available online.
How to calculate your modified adjusted gross income (MAGI)
Once you have adjusted gross income, you "edit" to calculate your MAGI. For most people, MAGI is the same as AGI
Specifically, the Internal Revenue Code ((d) (2) (B)) indicates that MAGI is AGI increased by :.
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Any amount excluded from gross income in the 911 section (foreign earned income and housing costs for qualified individuals)
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Any amount of interest received or accrued by the taxpayer during the tax year is exempt from tax
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Any amount equal to the portion of social security benefits the taxpayer (as defined in Article 86 (d)) which are not included in gross income under section 86 for the taxation year. (Any amount received by the taxpayer because of the right to a monthly benefit in Title II of the Social Security Act, or 1 railroad retirement benefit level.)
the IRS phases of credits (including premium tax credits) and deductions that your income increases. By adding factors MAGI your AGI, the IRS determines how you really won.
On this basis, it determines whether you can take full advantage of premium tax credits. If you qualify for a tax credit, a tax credit calculator on online premium will help you assess your actual tax credit
Editor's Note :. This message was published in August 2014. 
Do you have questions about tax credits premium? Please leave a comment below.
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