Modified Adjusted Gross Income (MAGI)

The income number behind your subsidy

When you apply for a Marketplace plan, the subsidy you get depends on your projected household income for the coming year. The specific figure is your modified adjusted gross income, or MAGI.

For ACA purposes, MAGI starts with adjusted gross income from your tax return and adds back:

• Untaxed foreign income.
• Tax-exempt interest, such as municipal bond interest.
• Non-taxable Social Security benefits.

It includes income for everyone in your tax household who is required to file a return.

What usually counts

• Wages and salaries.
• Net self-employment income after business expenses.
• Interest, dividends and capital gains.
• Rental income.
• Taxable retirement distributions, including traditional IRA withdrawals.
• Unemployment compensation.
• Social Security benefits, including the non-taxable portion.

What usually does not count

• Gifts and inheritances.
• Roth IRA withdrawals that are qualified.
• Child support received.
• Supplemental Security Income.

Example for a self-employed household

Elena and Mark are married. Elena is a photographer with gross 2027 receipts of $95,000 and business expenses of $20,000. Mark works part-time for wages of $18,000.

• Elena's net business income: $75,000.
• Adjustments on their return, such as part of self-employment tax and retirement contributions, lower AGI further.
• Their MAGI ends up near $84,000.

That puts them just under the 2027 subsidy line of $86,560 for a household of two. A small change, such as an extra project or a capital gain, could push them over and remove their premium tax credit.

How to estimate MAGI as a business owner

• Start with last year's tax return, then adjust for expected changes.
• Use net business income, not gross revenue.
• Remember capital gains, IRA withdrawals and investment income.
• Update the Marketplace during the year if income changes.

Ways MAGI can move

Some items reduce AGI and therefore MAGI, including contributions to a traditional IRA, SEP-IRA or solo 401(k), HSA contributions, and the self-employed health insurance deduction. Timing matters too, since income and gains land in the year received.

Marketplace vs private plans

MAGI only matters for Marketplace subsidies. If your MAGI is well above the subsidy line, it stops affecting your premium, and a private plan may be worth comparing.

Learn more in our guides to the 2027 ACA subsidy cliff and 1099 contractor health insurance. To check where your projected MAGI lands, request a quote.

General information, not tax advice — confirm with your CPA based on your specific entity structure.