The Affordable Care Act (also called ACA, federal health care reform or sometimes “Obamacare”) expands health coverage to millions of previously uninsured Americans and makes significant changes to health insurance practices nationwide.

The Health Insurance Marketplace is an online resource for comparing different plans and benefits in order to choose a health insurance plan that’s best for you. This resource may appeal most to people who currently don’t have church-sponsored insurance, including those who work part-time, work for a small business, are self-employed or currently not employed. Plans offered through the Marketplace are administered by established insurance carriers. The government is not administering health insurance—it’s just providing a new way to make insurance accessible to more Americans.

The Health Insurance Marketplace may not be right for everyone—it is just one of several options for health coverage. The options are complicated, and vary by who you are and where you work.

Clergy housing allowance is not included in adjusted gross income. MAGI also excludes your pre-tax contributions (salary deferrals) to the retirement account [401(k) or 403(b) type plan], and pre-tax contributions to flexible spending accounts. MAGI also excludes certain “above-the-line” income deductions, such as IRA contributions and self-employment (SECA) taxes.

What is Modified Adjusted Gross Income (MAGI)

Adjusted Gross Income (AGI)

Line 4 – 1040ez
Line 21 – 1040A
Line 37 – 1040

Include:

• Wages, salaries, tips, etc.
• Taxable interest
• Taxable amount of pension, annuity or IRA distributions and Social Security benefits
• Business income, farm income, capital gain, other gains (or loss)
• Unemployment compensation
• Ordinary dividends
• Alimony received
• Rental real estate, royalties, partnerships, S corporations, trusts, etc.
• Taxable refunds, credits, or offsets of state and local income taxes
• Other income

Deduct:

• Certain self-employed expenses5
• Student loan interest deduction
• IRA deduction (traditional IRAs)
• Moving expenses
• Penalty on early withdrawal of savings
• Health savings account deduction
• Alimony paid
• Domestic production activities deduction
• Certain business expenses of reservists, performing artists, and fee-basis government officials

Add Back:

Non-taxable Social Security benefits4 (Line 20a minus 20b on a Form 1040)
• Tax-exempt interest (Line on 8b on a Form 1040)
• Foreign earned income & housing expenses for Americans living abroad (Form 2555)

Modified Adjusted Gross Income (MAGI)

<  Back

Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (763) 425-8778 
Fax: (888) 876-5101
Email: cfr@clergyfinancial.com