ACA Calc.com
Guides · MAGI

What counts as income (MAGI) for ACA subsidies

Your premium tax credit — and whether you clear the 400% cliff — is measured against your modified adjusted gross income. Here’s what that figure includes, what it doesn’t, and the moves that legitimately lower it.

Why MAGI is the number that matters

ACA eligibility isn’t based on your salary or your take-home pay. It’s based on modified adjusted gross income (MAGI) for your whole tax household, expressed as a percentage of the Federal Poverty Level. That single figure decides your expected contribution, the size of your credit, and whether you land under or over the 400% subsidy cliff. Getting it right is the difference between a good estimate and a surprise at tax time.

What MAGI includes

Start with your adjusted gross income (AGI) — the bottom-of-the-front-page figure from your federal return. For ACA purposes you then add back a few items that AGI leaves out:

  • Tax-exempt interest (for example, municipal-bond interest).
  • Untaxed Social Security benefits — the portion of benefits not already included in AGI.
  • Excluded foreign earned income.

The result is your MAGI. It counts income for everyone in your tax household, not just the person seeking coverage — a working spouse’s wages or a dependent’s income can count.

It’s the income you project, not last year’s

When you enroll, you estimate the MAGI you expect for the coverage year — 2026 income for 2026 coverage — not last year’s actual number. The marketplace uses your projection to set your advance credit. That makes an honest, current estimate important, especially if your income varies (self-employment, contract work, investment gains).

Why it’s reconciled — and why 2026 raises the stakes

The credit is “advance” — paid to your insurer during the year based on your estimate — and then reconciled on your tax return against your actual MAGI. If you earned less than you projected, you may get more credit back; if you earned more, you repay part of it. For 2026 the income-based caps on repayment were removed, so if you took more advance credit than you ended up qualifying for, you repay the full difference. Underestimating your income near the 400% line is riskier than it was under the old caps. (More in what changed for 2026.)

Moves that lower MAGI

Because MAGI starts from AGI, anything that reduces AGI generally reduces MAGI. Common, legitimate levers — stated neutrally, not as advice, and dependent on your full tax picture:

  • Deductible HSA contributions, if you have an HSA-eligible high-deductible plan.
  • Traditional IRA, SEP, or solo-401(k) contributions — pre-tax retirement contributions, especially useful for the self-employed.
  • The self-employed health-insurance deduction and ordinary business expenses.
  • Timing income — deferring a bonus, a Roth conversion, or a capital gain into a different tax year changes which year it lands in.

These reduce the MAGI that counts for the credit, which is exactly why they can matter for a household hovering near 400% FPL. Whether any of them makes sense depends on your whole return — confirm with a tax professional before acting.

Try your number

Enter a MAGI estimate in the calculator to see your percent of FPL, your estimated 2026 credit, and how much room you have before the cliff. Adjust it to see how a pre-tax contribution or a projected raise moves the result.

Related guides

!

Educational, not advice. MAGI depends on your complete tax return; this guide describes the general rules for the 2026 plan year and is not tax or legal advice. Confirm your figures with the IRS premium tax credit guidance or a tax professional. See our disclaimer.

Sources: IRS Premium Tax Credit Q&A; IRC §36B and the ACA MAGI definition; IRS Rev. Proc. 2025-25.