What Is MAGI?
Modified Adjusted Gross Income (MAGI) is the specific income number the ACA uses to determine whether you qualify for premium subsidies, cost-sharing reductions, and Medicaid. It's similar to your Adjusted Gross Income (AGI) from your tax return, with a few items added back.
How to Calculate MAGI
MAGI = Adjusted Gross Income (AGI) + tax-exempt interest income + excluded foreign income + non-taxable Social Security benefits
For most people, MAGI equals their AGI — the additions only apply to specific situations.
MAGI for Self-Employed / 1099 Workers
This is where MAGI gets powerful for freelancers and 1099 contractors:
- Start with gross 1099 income
- Subtract business deductions (mileage, equipment, home office, etc.)
- Subtract 50% of self-employment tax
- Subtract HSA contributions
- Subtract retirement contributions (SEP-IRA, Solo 401k)
- = Your MAGI for ACA purposes
Example: A freelancer grossing $75,000 with $15,000 in business deductions, $5,000 SEP-IRA contribution, and $4,400 HSA contribution has a MAGI of ~$48,000 — qualifying for significant subsidies that a $75,000 earner wouldn't normally get. Every deduction dollar lowers your MAGI and increases your subsidy.
Why MAGI Matters for Private Plan Decisions
If your MAGI is above ~$60,000 (individual), subsidies become minimal. At that point, marketplace plans and private off-marketplace plans cost roughly the same. Above ~$80,000, there's little financial reason to use the marketplace — a private plan gives the same coverage without the government platform.
Related Terms
Last updated: March 30, 2026.
