Tag Archives: modified adjusted gross income

Atul Gawande on Obamacare’s Opponents—How Much Damage Can They Do? Will the Exchanges Open Tomorrow?

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Tomorrow, millions of Americans will find out how much healthcare will cost in their state marketplaces as the Exchanges begin enrolling new customers.  On the eve of that event, Dr. Atul Gawande writes about the forces lined up to oppose healthcare reform. The essay, which appears in the newest issue of the New Yorker, quite rightly compares those who are fighting the Affordable Care Act to those who, so many years ago, tried to block the Civil Rights Act.  In each case, conservatives refused to recognize a basic human right.

Gawande is not worried that Republicans will succeed in stopping the Affordable Care Act. Already, the reform is rolling forward on the ground, affecting peoples’ lives. Even if the extreme right wing of the Republican party manages to shut down the government tomorrow, the legislation is largely funded through mandatory appropriations that cannot be curtailed through Congressional  Nevertheless those who are blinded by rage can do great harm.

                                  Who Will Be Hurt? –Paul Sullivan’s Story  

Gawande opens his essay by reminding us of who will suffer—Americans like Paul Sullivan. “Sullivan was in his fifties, college-educated, and ran a successful small business in the Houston area. He owned a house and three cars. Then the local economy fell apart. Business dried up. He had savings, but, like more than a million people today in Harris County, Texas, he didn’t have health insurance. ‘I should have known better,’ he says. When an illness put him in the hospital and his doctor found a precancerous lesion that required treatment, the unaffordable medical bills arrived. He had to sell his cars and, eventually, his house. To his shock, he had to move into a homeless shelter, carrying his belongings in a suitcase wherever he went.”

Under the ACA, this would never happen. His out-of-pocket spending would be capped at $6,350–as long as he signed up for insurance. (If he earned less than $45,650, the cap would be considerably lower.) This is how the legislation helps even those who are too wealthy to qualify for a subsidy. They are protected against financial ruin.
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Will You Be Eligible for A Government Subsidy When You Buy Health Insurance in 2014? Check out Your “Modified Adjusted Gross Income” (MAGI) –You May Be Pleasantly Surprised

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Before writing this post, I had no idea how to calculate my “Modified Adjusted Gross Income” (MAGI). But I did know that this is the number the IRS will use when deciding whether people purchasing their own insurance in their state’s online marketplace (a.k.a. Exchange) will qualify for a tax credit to help them cover their premiums.

This piqued my interest.

The first thing you need to know is that there are different definitions of Modified Adjusted Gross Income (MAGI) for different situations. The  the Affordable Care Act has its own definition to be used when determining whether someone is eligible government subsidies (premium tax credits) when purchasing  his own insurance in the state Exchanges. 

When calculating your MAGI, you can subtract certain items from your adjusted gross income including: student loan interest, certain moving expenses,, some self-employment expenses, and any alimony that you pay.

As a result, an individual grossing $50,000 (or a family of four with income of $98,000)  might well discover that after they deduct these items from, their MAGI falls under the cut-off for subsidies ($45,960 for an individual, $62,040 for a couple,  $78,120, for a family of three, $94, 200 for a family of four)

This is why, even if think you earn a few thousand too much to qualify for government help, you should ask whoever prepares your taxes about your MAGI.

Kiplinger’s  Kimberly Lankford, suggests other ways to lower your MAGI by “selling losing stocks or boosting business expenses to offset self-employment income.”  But, she warns, “Be careful with moves that could boost that your MAGI and make it more difficult to qualify for the subsidy — such as converting a traditional IRA to a Roth.”  .

Clearly MAGI is a tricky number. The good news is that you don’t have to do the arithmetic yourself. Your Exchange will do it for you when you apply. j(Ultimately, the IRS does the calculation).

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