Introduction

The Affordable Care Act (ACA), commonly referred to as Obamacare, is a health care reform law enacted in 2010 by former President Barack Obama. It aims to provide affordable health insurance for all citizens and decrease overall health care costs. Key to the ACA’s structure is its provision of subsidies to help people with limited incomes afford health insurance. In order to determine eligibility for these subsidies, it is necessary to calculate an individual or family’s income. This article will provide an overview of how to calculate income for Obamacare purposes.

Modified Adjusted Gross Income

Obamacare uses Modified Adjusted Gross Income (MAGI) to evaluate eligibility for premium tax credits and cost-sharing reductions – key components of the subsidy system. MAGI calculations typically include these sources:

1. Adjusted Gross Income (AGI) from your federal income tax return.

2. Non-taxable Social Security benefits.

3. Tax-exempt interest income.

4. Foreign earned income (if you live and work abroad).

Here’s a step-by-step guide on how to calculate your MAGI:

Step 1: Locate Your AGI

First, find your Adjusted Gross Income (AGI) by checking your most recent federal income tax return. It is often displayed on Line 7 of Form 1040.

Step 2: Add Non-Taxable Social Security Benefits

Next, add any non-taxable Social Security benefits that you receive (if applicable). These can be found in Box 5 of your SSA-1099 form – the Social Security Benefit Statement.

Step 3: Add Tax-Exempt Interest

If you receive tax-exempt interest income, such as certain types of municipal bond interest earnings, add this amount to your current total. This information can usually be found on lines 2a and 2b of Form 1040.

Step 4: Add Foreign Earned Income

Finally, if you live and work abroad, you will need to add your foreign earned income to your
MAGI calculation. To determine this amount, refer to Form 2555 (Foreign Earned Income) from
your federal income tax return.

Step 5: Calculate Your Total MAGI

Sum up the amounts from Steps 1 through 4 to get your total Modified Adjusted Gross Income.

Conclusion

Calculating income for Obamacare purposes is essential in determining eligibility for subsidies and cost-sharing reductions, which can ultimately make health insurance more affordable. By understanding how to calculate your Modified Adjusted Gross Income, you can better assess options for health coverage and take advantage of the ACA’s benefits.