Whether you are shopping for insurance personal health, help a customer with taxes, or as a result of the affordable care Act, you have probably heard the term Modified adjusted gross income, or MAGI .
MAGI is one of the calculations on the federal government's income to determine eligibility for various credit programs and tax assistance. This article provides a quick guide where MAGI is used and why it is important to small business owners
Note -. This is our free eBook, The Small Business Owner Modified Adjusted Gross Income Guide . To access the complete resource here.
First, What is MAGI?
MAGI is a representation of your income to determine if you are eligible for various federal tax credits (including of premium tax credits health insurance and pension plans).
MAGI is your adjusted gross income the deductions and amended by adding specific deductions back in
Related :. How to calculate modified adjusted gross income (MAGI)
?Where is MAGI opportunity
the federal government uses to calculate MAGI income for determining eligibility for various credit programs and tax assistance, including the following:
Eligibility for tax credits premium
If your MAGI is less than 400% of the federal poverty level (FPL ), you may qualify for discounts on individual health insurance.
Eligibility for Medicaid or CHIP
Depending on your state, if your MAGI is less than 138% of FPL, you and / or your dependents may be eligible for Medicare government programs like Medicaid or CHIP.
Percentage of the federal poverty line
as mentioned above, the FPL is a measure used for eligibility government program. See: Federal 2015 poverty level (FPL) Charts
Single Shared Responsibility Payment
If you do not have health insurance coverage, you may be required to pay tax at tax time. Unless, your gross income ( not MAGI) is below the filing threshold.
retirement savings deductions
MAGI is used to determine how the contribution of an individual IRA is deductible.
Eligibility for tax credits for education
If your MAGI is less than $ 64,000 (single) or $ 128,000 (filing married jointly), you may qualify for a lifetime learning credit.
eligibility for tax credits for adoption
If your MAGI is less than $ 237,880, you may be eligible for programs credit and fiscal assistance to adoption.
Conclusion
understanding how to calculate MAGI help you understand eligibility for various tax credits and assistance programs, including premium tax credits, Medicaid eligibility, retirement savings deductions, tax credits for education, and tax credits for adoption.
What questions do you have about MAGI or where it is used? Download the PDF guide, or leave a comment below.
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