ELI nervously preoccupied w/ the election: estimating AGI for Obamacare

November 5, 2024 7:03 AM

I'm told the figure I should be putting into my Marketplace application here at open enrollment is AGI or MAGI. Once the explanation goes farther than that, it overtaxes my WHAT-IF-MY-COUNTRY-IS-TOTALLY-FUCKED addled brain.

It's my second year in private practice. Complicating factor: I have an S-Corp as of 2/1/24. So there's my salary that the S-Corp pays me and then the S-Corp itself has a bank account that gets income and spends money 1) paying my salary 2) paying business expenses 3) paying the IRS payroll taxes and stuff that my accountant does and I don't try to follow.

Which part of all of this is the Marketplace application asking for when it wants to know...actually it's asking for my November income I think which I assume is asking for an estimated monthly income because November basically just started here on AGGGGH ELECTION DAY. One place I asked this I was told to use my MAGI which sounds all mystical and stuff but I remain befuddled.

Holp?

posted by less-of-course to Work & Money (4 answers total)

It's asking for your income in November because Medicaid eligibility is based on your current monthly income, while eligibility to get the Premium Tax Credit applied in advance of end-of-year tax filing is based on your estimated MAGI for the year. Use your individual income (what the S-Corp or other employers pay you): the Adjusted Gross Income you will report on a 1040.
posted by Theiform at 7:22 AM on November 5

I usually figure this out myself but this year is more complicated so I think I will make an appointment with April, an insurance agent I met through the healthcare.gov site where they ask need some help? and they give you names of local professionals that will help you figure it out. I don't know how they get paid but they don't charge you. I have vetted April by asking her questions now and then over the years I have known her and she is always helpful, always right and she really knows insurance. Maybe you can find an April where you live? I'm going to turn everything over to her this year.
posted by memoryindustries at 8:18 AM on November 5

Literally call the 800 number at the bottom of the page at healthcare.gov. They have a lot of agents and they’re really helpful and knowledgeable. I think I’ve hit maybe one that wasn’t great, out of like 20 that I’ve spoken to
posted by toodleydoodley at 2:42 PM on November 5 [1 favorite]

They are definitely NOT asking for 2) or 3). So you can put those straight out of your mind - and that simplifies things dramatically.

Just totaling up how much you are expecting to be paid under 1) for the year 2025 would be a good first crack at your AGI. Unless you have some other source of personal income (investments, rental properties you own, some other business you own, some other job you have for part of the year, unemployment, alimony . . . ) your AGI will be that number at most - and perhaps a little lower.

You can use this calculator to get an idea. Notice that everything in the left column is added to your AGI (for the average person the vast majority of that is going to be their regular wages) and everything in the right column reduces the AGI.

For Healthcare.gov purposes it is usually better to overestimate the AGI by a little bit rather than underestimating it - if you're not sure e.g. about your expected income in the coming year.

MAGI is a modified version of AGI and it will always be the same or higher than AGI. To calculate it for healthcare.gov purposes, you take you AGI and make these adjustments:

- Foreign earned income and housing expenses if you live abroad - I'll bet you don't live abroad so you can just ignore this

- Tax-free interest (typically earned on municipal bonds) - Unless you own municipal bonds you can ignore this

- Non-taxable Social Security benefits - Unless you are already receiving Social Security Benefits (i.e., a regular monthly check from the Social Security Administration) you can ignore this

So unless any of those three items apply to you, your MAGI is simply the same as your AGI. Info source here (look under #6. Health Care).

If it seems too incomprehensible given this simplified explanation, then probably best to just work with an agent or assistant of the sort you can easily find here, as others have recommended. They can easily take you through the steps to figure your AGI and MAGI.

P.S. Most people can just look at line 11 of your IRS Form 1040 (annual tax form) to see their AGI. Then it is easy to calculate MAGI from that, as I outlined above. Your problem is, the recent start-up of your private practice. So you may not have the tax records you need yet, or perhaps your income is variable and still increasing year by year?

If this is the second year of your private practice, I assume that means you have 2023 tax forms in hand. In that case you can simply look at Form 1040 line 11 to see your AGI for that year. If you think 2025 is going to be quite similar to 2023, that is your answer right there. If you have a good idea how much higher your income will be in 2025 vs 2023, and everything else will most likely be quite similar, you can simply adjust your estimate for 2025 AGI based on 2023 plus that income increase.

Hate to say it, but this is always something of a guess, because you are trying to predict your future 2025 AGI. It is reasonable to just use your 2023 AGI, and lots of people do, because that is the most recent year for which you have a completed tax return at this moment in time. But if you think your income in 2025 will be significantly larger than 2023, it is also reasonable to adjust your AGI upwards based on what you think will happen in 2025 - because underestimating your AGI will lead to you needing to pay the IRS back a significant bit of money when 2025 taxes are done. (If you underestimate your AGI they will overestimate your premium subsidy.)

If you overestimate your AGI by a little, it will result in you getting a refund when 2025 taxes are done (IRS will underestimate your premium subsidy - meaning that you'll pay more towards your health insurance each month, but then the IRS will refund a portion of that when you do 2025 taxes).
posted by flug at 5:05 PM on November 7