Modified Adjusted Gross Income (MAGI)

Report
1
MODIFIED ADJUSTED
GROSS INCOME (MAGI)
12-10-2014
Basic Benefit Training: Health Access
Vicky Pulos [email protected]
617-357-0700 Ext. 318
2
Understanding MAGI
• How do you identify the members of a MAGI household?
• What income is counted & deducted to calculate MAGI
household income?
• How do MassHealth & premium tax credit-Connector
MAGI rules differ?
3
Why understand MAGI
• To complete applications more accurately
• To flag incorrect results & refer patients/clients for help
• To help fix incorrect results informally or through an
appeal
• To inform applicants how tax related decisions may affect
their health benefits
4
MAGI
A new way to figure out family size & income that will be
used to determine eligibility
• For all MassHealth applicants except those• Applying based on age 65 or older,
• Applying for long term care or alternatives to LTC,
• Applying only for a Medicare Buy-In, or
• Eligible based on receipt of another benefit like SSI (including
“deemed” SSI), TANF, or EAEDC & some other groups
• For all applicants for premium tax credits & other
subsidies in the Connector
5
MAGI is based on tax rules
• MAGI uses tax rules about tax filers & tax dependents to
identify a household
• MAGI uses tax rules about what is included in income &
what isn’t
• Tax rules on what counts as income are “modified” for
purposes of Connector & MassHealth,
6
Why the change to MAGI?
• Required by Affordable Care Act
• Help paying for insurance in Connector is through
premium tax credits
• Medicaid aligns with premium tax credits to make
coordination easier between the two programs
7
When will MAGI apply?
• MAGI rules effective Jan. 1, 2014
• As a practical matter, MAGI was implemented with new
computer system that went live Nov. 15, 2014
• For people enrolled in regular MassHealth prior to Nov.
15, 2014 (1.2 million) MAGI will apply -• At annual renewal in 2015
• When mid-year changes are reported & processed
8
3-step process
• Who is in MAGI household?
• What is included in MAGI-based income?
• What is MAGI household income?
9
1st step: Who is in the household?
• MAGI rules based on tax household
• No exceptions to tax-filing household in Connector
• MassHealth MAGI household
• Exceptions to tax-filing household for some people
• Non-tax household rules for non-tax filers
• MassHealth Disabled Adult household rules
10
Unique features of MAGI
• In MassHealth & Connector, people who don’t live
together may be in same benefit household based on tax
filing
• In MassHealth, households must be “built” for each
applicant
• Sometimes, A is in B’s household, but B is not in A’s household
11
Why household size and
composition matter
• Household size affects conversion of income to a federal
poverty level percentage
Household
size
100% FPL
133% FPL
200% FPL
1
$972.50
$1293.43
$1945.00
2
$1310.83
$1743.41
$2621.67
3
$1649.17
$2193.39
$3298.33
4
$1987.50
$2643.38
$3975.00
5
$2325.83
$3093.36
$4651.67
• Who is in household determines whose income counts
12
Households for Premium Tax Credits
(Connector)
• Household = individuals for whom a taxpayer claims a
deduction for a personal exemption
• Taxpayer can claim personal exemption for:
– Self and spouse (filing jointly)
– Dependents
• Children and other relatives who meet certain requirements
• Person may be a dependent even if he files a tax return (as
long as he does not claim his own exemption)
13
14
Premium Tax Credit MAGI Household
Household
= Tax Unit
Filer
Spouse
Qualifying
Child(ren)
Qualifying
Relative(s)
15
Who qualifies as a dependent
US citizen/ noncitizen
“substantially present” in
US,
Live with you for more
than half the year,*
Under 19, or 24 if fulltime student or any age
if disabled, and
doesn’t provide more
than half of own support.
*Different rule if
custodial parent
releases exemption in
favor of noncustodial
parent
16
Who qualifies as a dependent
US citizens or noncitizens
“substantially present” in US,
You provide more than 50% of
dependent’s support,
Related to your OR lives in
your home all year, and
Dependent makes less than
$3,950 (2014), and
Can’t be claimed as a
Qualifying Child.
•
•
•C e n t e r o n B u d g e t a n d P o l i c y P r i o r i t i e s
Example: Married Couple with
Children (Reyes family)

The Reyes are a family of four.
Mom and dad are married. They have two
children.

•–
They file taxes as married filing jointly &
claim both children as dependents.

How many tax filing households are there?
How many people are in the tax filing
household?
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Households for Premium Tax Credits
 Household is based on
expected tax filing
status for tax year in which advance premium
tax credit is being claimed
•–
•–
Household is not based on previous tax return
Life changes will affect household (and credit
amount)
•cbpp.org
21
Married Couples &
Premium Tax Credits
• General rule: Married couples must file jointly to qualify
for a premium tax credit.
• Couples are not considered “married” under tax rules if
legally separated or eligible to file taxes as Head of
Household
• Exception if married & unable to file jointly due to
domestic violence or abandonment
• Afternoon troubleshooting session will talk more
about this
22
Non-tax filers in the Connector
• Application asks: Do you expect to file taxes? If NO, you
will not be eligible for a premium tax credit or
ConnectorCare.
• Your application will be processed to see if you may
qualify for MassHealth or other benefits.
23
MassHealth MAGI Household
• MassHealth MAGI household differs from MAGI used for
PTC in Connector in a few ways
• MassHealth has rules for people who don’t expect to file taxes or
•
•
•
•
be claimed as dependents
MassHealth has some exceptions to basing household of a
dependent on tax household
MassHealth counts the household size of a pregnant woman as
including the babies she’s expecting
MassHealth includes married couples who live together in the
same household regardless of how they file
MassHealth has special rule for Disabled Adults
24
MassHealth & Disabled Adults
• Under ACA, MAGI does not apply to disabled adults
• Under 1115, MassHealth will use MAGI income counting
rules but modify tax filing household rules for disabled
adults
• MassHealth will apply non-filer household rules to disabled adults
who are claimed as tax dependents
Afternoon troubleshooting session will talk more about this
MASSHEALTH MAGI Household (HH)
If anyone in HH is pregnant include the number of babies expected in HH size *
Do you expect to file a
tax return & claim an
exemption for 2015?
No
Yes
Do you expect anyone to
claim you as a tax
dependent for 2015?
Your HH is you, a
spouse, if living with
you or filing jointly, &
your tax
dependents*
Yes
You have the same HH as the person
claiming you as a dependent plus a
spouse living with you,* unless an
Exception applies...
Exception 1: Are
you claimed by
someone other
than your
parent/spouse?
Exception 2: Are
you a child under
19 living with two
parents who will
not file jointly?
Exception 3: Are
you a child under
19 claimed by a
noncustodial
parent?
Yes: Non-tax filer rules apply
No:
Non-tax
filer
rules
apply
Your HH is you &, if
living with you:
your spouse, your
children under 19 &
if you are a child,
your parents &
siblings under 19*
26
Center on Budget and Policy Priorities
MassHealth Rule for Tax Filers
Household = tax filer and all persons whom taxpayer
expects to claim as a tax dependent
For married couples filing jointly, each spouse is
considered a tax filer
Married couples living together always in same
household regardless of filing status
Anyone pregnant includes fetus(es) in family size
•cbpp.org
28
MassHealth Rule for Non-filers Not Claimed as
Dependents
• Household = individual plus, if living with individual,
spouse and children under 19, and

For children under 19
Household also includes, siblings under 19 and parents
(including step-parents) living with child
Similar to 2013 MassHealth gross income rule but not
identical

•cbpp.org
•
•
•C e n t e r o n B u d g e t a n d P o l i c y P r i o r i t i e s
Example: Child Claimed by Non-Custodial Parent
Lisa lives with her son and files
taxes as a single individual
• Non-custodial dad claims son
as his only dependent
•
Counted in HH
Lisa
Son
Lisa
Son
Dad
HH Size for
Dad Medicaid
?
?
•cbpp.org
31
•C e n t e r o n B u d g e t a n d P o licy P r io r it ie s
Example: Non-Married Parents
 Dan and Jen live together with
their 2 children, Drew and Mary
 Dan and Jen both have income
 For taxes, Dan claims the
children, Jen files on her own
Dan
Dan
Jen
Drew
Mary
Counted in HH
Jen
Drew
•
Mary
•
•
•
•
•
•
•
•
•
•
•
HH Size for
Medicaid
?
?
?
?
•cbpp.org
33
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Comparing household rules
Connector -Premium Tax Credits-Tax Filing Household
• Household equals tax filing unit
• Members of tax filing unit have same household size
MassHealth
• Household does not always equal tax filing unit
• Individual determination of household – may vary across
family members
35
36
37
2nd step: determining MAGI-based
income
• MAGI rules on what is counted in income & what is not
• What counts in Gross (or Total) income
• Line 7-21 (Total on Line 22) on Form 1040
• Deductions from Total Income to get to Adjusted Gross Income
(AGI)
• Lines 23-36 (AGI on Line 37) on Form 1040
• Modification of AGI for both MassHealth & Connector, 26 CFR
1.36B
• Added modification in MassHealth only, 42 CFR 435.630
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What is MAGI?
• Need to Calculate Adjusted Gross Income:
• Add up total income (lines 7-22 on IRS Form 1040)
• Subtract deductions (line 23-36 on Form 1040)
• Adjusted gross income (line 37 on Form 1040)
• Modification of AGI:
• Add in the following nontaxable income:
• Tax exempt interest (line 8b on Form 1040)
• Non-taxable social security (line 20a less 20b on Form 1040)
• Tax exempt foreign income (line 45 & 51 IRS Form 2555)
Center on Budget and Policy Priorities
What Counts in Determining Total (Gross)
Income?

Income in the form of money, goods, property, and
services
Income is counted unless it is exempted under tax
rules
 Calculated on IRS Form 1040 on lines 7 to 22

•cbpp.org
42
43
Pre-tax wage deductions
Center on Budget and Policy Priorities
How Is Adjusted Gross Income Calculated?
 Line 37 on form 1040
 Total Income minus
adjustments = AGI
(Adjustments also
known as “above the
line” deductions)
•cbpp.org
45
Center on Budget and Policy Priorities
What Adjustments are Made to Total Income to
Determine Adjusted Gross Income?*
Examples:
 Job-related moving expenses
 Student loan interest
 Tuition and fees **

IRA contributions
 Alimony paid
*Note that many adjustments are capped or may be limited based on a
taxpayer’s income
**May be more tax savings by claiming “below the line” education tax credits instead
•cbpp.org
Differences in Income Sources: MAGI and 2013
MassHealth Gross Income Rules
Income Source
2013 MassHealth Rules
MAGI Rules
Self-employment income
Counted with deductions for
business expenses but losses
not counted
Counted with deductions for
business expenses, & losses
reduce AGI
Salary deferrals (flexible
spending, cafeteria and
401(k) plans
Counted
Not counted in Job Income
Child support received
Counted
Not counted
Alimony paid
Not deducted from income
Deducted from income
VA benefits
Workers’ compensation
Counted
Not counted
Counted
Not counted
Gifts & inheritances
Counted as lump sum
income in month received
Not counted
Social Security
Counted
Counted
48
IRS.GOV
49
MassHealth vs. Connector
•
•
•
Differences in household rules affect household income
5% FPL deduction in MassHealth only
Some income counted in Connector does not count in MassHealth
•
•
•
•
Lump sum payments only counted in mo. of receipt
Certain taxable education expenses e.g. work study IF used for
education not living expenses
Certain taxable distributions to American Indians
MassHealth looks at current monthly income; Connector looks at
expected annual income for the year in which you are receiving
benefits
50
5% MassHealth income disregard
• New disregard of 5% of federal poverty level
• Effectively increases MassHealth income ceiling e.g. from
133% to 138% FPL
• 5% disregard does not apply to Premium Tax Credits
calculation
51
5% of FPL Deduction only varies by family
size not by family income
52
Example of 5% deduction
• Married couple file jointly & claim one child as dependent;
Their MAGI is $2,250 per mo. Income ceiling for
MassHealth Standard for a family of 3 (133% FPL) is
$2193.39
• 5% of 100% FPL for family of 3 is $83 per mo
• Countable family income is $2250 -$83 = $2167
• MassHealth MAGI is UNDER 133% FPL, family is eligible
for Standard
53
3rd step: determining
household income
• All members of household counted in determining family
size & applicable FPL
• Not all members of household will have their income
counted in household income
Center on Budget and Policy Priorities
Whose Income Counts for Premium Tax Credits
and MassHealth?
Household income = Sum of MAGI of all individuals in
the household who are required to file a tax return
Income of children and tax dependents not counted unless
expected to be required to file a tax return
• For children in 2014
 earned income more than $6200 or
 taxable unearned income more than $1000 or
 Gross taxable income more than greater of $1000 or
$5850 earned plus $350
 child support and nontaxable social security do NOT
count toward threshhold
-- Don’t count income if return filed (e.g. to get refund of
withheld taxes) but not required to file
•–
•cbpp.org
•
•
Example: Married Couple with
Children (Reyes family)

Mom and dad file a joint return and claim
both children as dependents

Family’s financial situation:
•–
•–
$10,000 – Mom’s income from own business
$25,000 – Dad’s gross salary(including $4,000 pretax retirement
contribution)
$5,000 – Son’s income from weekend and summer jobs
•–
Who is in tax filing household? What is MAGI income in Connector?
Who is in MassHealth MAGI household for each individual? What is MassHealth
MAGI income for each individual in household?
•
•
•C e n t e r o n B u d g e t a n d P o l i c y P r i o r i t i e s
Example: Married Couple with
Children (Reyes family)

Mom and dad file a joint return and claim
•both children as dependents

Family’s financial situation:
•–
•–
$10,000 – Mom’s income from own business (counted)
$21,000 – Dad’s salary (counted) less $4000 pretax contribution
$5,000 – Son’s income from weekend and summer jobs (not counted)
•$31,000 –Household income for tax filing household
•–
•–
Household income for MassHealth and PTC :
MassHealth
Premium Tax Credits
HH
Income
FPL
HH
Income
FPL
Mom
4
$31,000
125%
4
$31,000
130%
Dad
4
$31,000
125%
4
$31,000
130%
Son
4
$31,000
125%
4
$31,000
130%
Daughter
4
$31,000
125%
4
$31,000
130%
cbpp.org
Example: Non-Married Parents

Dan and Jen are not married, but live together
with their 2 children, Drew and Mary

Dan claims the children. Jen files on her own

Family’s financial situation:
•–
•–
$26,000 – Dan’s income
$22,000 – Jen’s income
•MassHealth
•Premium Tax Credits
•HH •Income FPL(- •HH •Income
•Dan
•3
•Jen
•1
•Drew
•4
•Mary
•4
?
?
?
?
5%)
?
•3
•1
•3
•3
?
?
?
?
FPL
?
?
?
?
•
Example: Non-Married Parents

Dan and Jen are not married, but live together
with their 2 children, Drew and Mary

Dan claims the children. Jen files on her own

Family’s financial situation:
•–
•–
$26,000 – Dan’s income
$22,000 – Jen’s income
•MassHealth
•Premium Tax Credits
•HH •Income FPL(- •HH •Income
•Dan
•3
•Jen
•1
•Drew
•4
•Mary
•4
5%)
•$26,000 •126% •3
•$22,000 •184% •1
•$48,000 •196% •3
•$48,000 •196% •3
•FPL
•$26,000 •131%
•$22,000 •189%
•$26,000 •131%
•$26,000 •131%
•
Center on Budget and Policy Priorities
Income and Household Changes Can Affect
Eligibility and/or Amount of Assistance
 Increase or decrease in income
 Household changes:
•–
•–
•–
Birth or adoption of child
Marriage, divorce or legal separation
Death of family member
•–
Family member no longer eligible to be claimed as
tax dependent
•cbpp.org
Center on Budget and Policy Priorities
Report Changes in Households and Income to
the MassHealth or Connector

MassHealth
•–
•–

Change taken into account prospectively
Eligibility re-determined based on monthly income
Premium tax credits
APTC will be adjusted prospectively based on recalculated
annual income
The final credit amount will depend on household at the end of
the tax year
•cbpp.org
61
More on MAGI
• Federal Regulations
• 42 CFR 435.603 (Medicaid) and
• 26 CFR §1.36B-1 (Tax credits)
• State regulations 130 CMR 506 on mass.gov/masshealth
• 1115 Demonstration posted on mass.gov/masshealth
62
Healthreformbeyondthebasics.org
63
Other secondary sources
• National Health Law Program (NHeLP), The Advocate’s
Guide to MAGI, posted on
http://healthlaw.org/images/stories/2013_10_18_AGMAGI
.pdf
• MLRI “Understanding the Affordable Care Act: How
MassHealth will count income in 2014” posted at
masslegalservices.org

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