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How Do I Calculate My Health Insurance Tax Credit?

Beginning in 2014, massive health insurance tax credits will become available to help you and your family buy health insurance coverage through the new state Health Insurance Marketplaces. If you are eligible, these tax credits will cap the cost of your family’s health insurance at 2 – 9.5% of income. Here’s a quick 2 step overview of how to calculate your health insurance tax credit.

health insurance tax credit calculator How Do I Calculate My Health Insurance Tax Credit?

Step 2 – Use Your MAGI and Household Size to Determine if You are Eligible for a Tax Credit

Step 1 – Calculate Your Modified Adjusted Gross Income (MAGI) Why Does MAGI Matter? Modified Adjusted Gross Income is a measure used by the IRS to determine if a taxpayer is eligible to use certain deductions, credits, or retirement plans. “Modified Adjusted Gross Income” (not “Adjusted Gross Income”) will be used in determining eligibility for your health insurance tax credits.

The IRS phases out the tax credit as your income increases. By adding MAGI factors back to your AGI, the IRS determines how much you really earned. Beginning in 2014, your MAGI determines whether you will be eligible for premium tax credits on the new Health Insurance Marketplaces

What is Adjusted Gross Income? Generally, your Adjusted Gross Income (AGI) is your household’s income less various adjustments. Adjusted Gross Income is calculated before the itemized or standard deductions, exemptions and credits are taken into account.

What is Modified Adjusted Gross Income? Generally, your Modified Adjusted Gross Income (MAGI) is the total of your house hold’s Adjusted Gross Income and any tax-exempt interest income you may have (these are the amounts on lines 37 and 8b of IRS from 1040).

How to Calculate Your Gross Income (GI) Your gross income is the money you earned through wages, interests, dividends, rental and royalty income, capital gains, business income, farm income, unemployment and alimony. This is the basis for your AGI calculation.

Gross income includes salary, interest earned, income from investments and basically any income you made through business, trade or investments.

How to Calculate Your Adjusted Gross Income (AGI) Once you have gross income, you “adjust” it to calculate your AGI. You make adjustments by subtracting qualified deductions from your gross income.

Adjustments can include items like some contributions to IRAs, moving expenses, alimony paid, self-employment taxes, and student loan interest.

There are many free AGI calculators available online.

How to Calculate Your Modified Adjusted Gross Income (MAGI) Once you have adjusted gross income, you “modify” it to calculate your MAGI.

Step 2 – Use Your MAGI and Household Size to Determine if You are Eligible for a Tax Credit You can use the following table to figure out if you would be eligible for a tax credit based on your 2013 income.

2013 Federal Poverty Line (FPL) Guidelines*

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