PM 08-03-00: MAGI Budgeting

WAG 08-03-00

new textSee policy memorandum dated 10/03/13 Verifications for Medical Programs.

new textAlso see Medical Morsel dated 04/01/14 Electronic Verifications for Medical Programs.

The Family Health Plans, ACA Adult, and New TextFamily Planning medical programs use the Modified Adjusted Gross Income (MAGI) budgeting methodology. MAGI is a budgeting methodology used to determine:

  1. who to include in each person's Eligibility Determination Group (EDG) or income standard, and
  2. how to count income.

For information about who to include in the MAGI EDG, see PM 15-06-01-f.

This section of the manual covers how to count income. Under MAGI, income counting is based on IRS taxable income rules with some modifications. MAGI income counting is used for FHP and ACA Adult and New TextFamily Planning EDGs whether or not the individuals plan to file a federal tax return. new textThe Family Planning program utilizes MAGI budgeting but the household size will always be two regardless of how many individuals reside within the home.

MAGI Terms and Definitions

Term Definition
Income Income is money received in exchange for work performed, from the sale of goods or services, or as a benefit.
Gross Income Income before taxes or other deductions
Adjusted Gross Income (AGI) A measure of income used to determine how much of income is taxable. The AGI is gross income from taxable sources minus allowable deductions.
Modified Adjusted Gross Income (MAGI)

MAGI is based on federal tax rules for determining adjusted gross income (AGI), with some modification.

MAGI includes the following sources of income that are not included in AGI:

  • Certain foreign investment income,
  • Tax-exempt interest, and
  • Social security benefits that are excluded from AGI.

In addition to these modifications, for Medicaid purposes only, MAGI will exclude the following income even if it is included in AGI:

  • Scholarships, fellowship grants and awards used for educational purposes; and
  • Certain American Indian/Alaska Native income.

Note: MAGI is a budgeting methodology and is NOT just an amount on a last year's tax return.

Income

Certain income is exempt and does not affect eligibility, while other income is nonexempt and affects eligibility.

All income must be reported and the amount and source documented in the case record. 

When determining eligibility use only nonexempt income currently available to meet the family or individual's needs. Nonexempt income is only available to the extent and in the amount that it is actually received.

MAGI Income and Deductions

Modified Adjusted Gross Income (MAGI) income counting income is based on IRS income counting rules. The general rule is that the countable income is the same income that is counted to get to the Adjusted Gross Income on the 1040 tax form, with some modifications.

Countable income under MAGI budgeting methodology is determined by:

  1. adding *taxable income (these are the types of income that are considered in lines 7-22 of the 1040 for tax year 2014),
  2. subtracting the allowable deductions (these are the deductions that are considered in lines 23-36 on the 1040 for tax year 2014) to get Adjusted Gross Income, and
  3. adding the following non-taxable income back to get Modified Adjusted Gross Income:
  • budgetable Social Security income,
  • foreign earned income,
  • tax-exempt interest, and
  • the portion of scholarships, awards or fellowship grants used for living expenses.

*Note: Taxable income may differ from gross pay when pre-tax deductions are subtracted from the gross amount. See PM 08-03-03 for information about pre-tax deductions.