Counting Income for MAGI What Counts as Income

Counting Income for MAGI What Counts as Income Wages, salaries, tips, gratuities, bonuses, commissions (before taxes are taken out). Form(s) W 2. Alimony received Annuities Awards and Prizes (In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes.) Back pay Breach of contract Business income (or loss). Schedule C or C EZ. Capital gain or (loss) (profit after subtracting capital losses). Schedule D. Cash support Compensation for personal services Court awards Debts forgiven/ canceled Director s fees Disability benefits (employer funded) Discounts Dividends o Qualified dividends o Ordinary dividends. Schedule B. Employee awards and employee bonuses Estate and trust income Farm income or (loss). Schedule F. Fees Foreign earned income Gains from sale of property or securities Gambling winnings (lotteries, raffles, etc) Hobby income Interest o Taxable interest. Attach Schedule B if required. o Tax exempt interest Interest on life insurance dividends IRA distributions Jury duty pay not given to an employer Military pay (not exempt from taxation) and military pension Non employee compensation Notary fees Other gains or (losses). Form 4797. Partnership, Estate and S Corporation income Pensions Punitive damage Railroad retirement Tier I (portion may be taxable) and Tier II Refund of state taxes 1

Rental real estate, royalties, partnerships, S corporations, trusts, etc (profit after subtracting costs). Schedule E. Retirement benefits (most) Rewards Royalties Self employment (profit once business expenses are paid) Severance pay Taxable Social Security benefits (For tax filers, the full amount of Social Security benefits count both taxable and non taxable. For dependents, there are special rules for when Social Security income is counted) Supplemental unemployment benefits Taxable scholarships and grants Taxable refunds, credits, or offsets of state and local income taxes Unemployment compensation Deductions Educator expenses Certain business expenses of reservists, performing artists, and fee basis government officials. Form 2106 or 2106 EZ. Health savings account deduction. Form 8889. Moving expenses (related to a job change). Form 3903. Deductible part of self employment tax. Schedule SE. Self employed SEP, SIMPLE, and qualified plans Self employed health insurance deduction Penalty on early withdrawal of savings Alimony paid Individual Retirement Arrangements (IRAs) deduction Student loan interest deduction Tuition and fees. Form 8917. Domestic production activities deduction. Form 8903. Add back in for MAGI Non taxable Social Security benefits. 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. For Medicaid, Exclude Scholarships, awards, or fellowship grants used for education purposes and not for living expenses Certain American Indian and Alaska Native income derived from distributions, payments, ownership interests, real property usage rights, and student financial assistance An amount received as a lump sum is counted as income only in the month received 2

Not Counted as Income * Note: Sources of income that are not taxable are not countable income. Accident and personal injury awards. Adoption assistance (most) Cancelled debts that were discharged because of your bankruptcy or insolvency. Form 1099 C. Capital gain on the sale of your primary residence, which is a house you ve owned and lived in for two of the five years prior to the sale. This gain is tax exempt, except to the extent that it exceeds $250,000 if you're a single taxpayer or $500,000 if you're married filing jointly. (There are restrictions, however, if your home has been used as a rental property or a home office.) Cash rebates from a dealer or manufacturer Child support received Compensatory damages awarded for physical injury or physical sickness (other than punitive) Death payments Disability benefits, if you paid the premiums for the policy. (If your employer paid for the policy, the disability payments are taxable.) Dividends on life insurance Federal Employees Compensation Act payments Federal tax credits and federal income tax refunds Foster care payments Gifts, bequests, and inheritances (In most cases, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you. If property is given to a trust and the income from it is paid, credited, or distributed to you, that income is also taxable to you. If the gift, bequest, or inheritance is the income from the property, that income is taxable to you) Income from qualifying scholarships Inherited assets or bequest (except to the extent that they would have been taxable income to the person from whom you inherited them) Insurance proceeds (Accident, Casualty, Health, Life) Insurance reimbursement of medical expenses not previously deducted Interest on tax free securities Interest income on municipal bonds issued in your state Interest on EE/I bonds redeemed for qualified higher education expenses Life insurance proceeds Meals and lodging for the convenience of employer Money that you rolled from one retirement account to another in a trustee to trustee transfer. Payments to the beneficiary of a deceased employee Pre tax contributions, such as those for child care, commuting, employer sponsored health insurance, flexible spending accounts and retirement plans such as 401(k) and 403(b), are not included in AGI but are not listed above because they are already subtracted out of W 2 wages and salaries. Proceeds from life insurance, accident insurance or health insurance Relocation payments Payments in lieu of worker s compensation 3

Rental allowance of clergyman Sickness and injury payments Scholarships and fellowship grants Social Security benefits (portion may not be taxable) Some qualified pension distributions for Public Safety Officers Supplemental Security Income (SSI) Temporary Assistance for Needy Families (TANF) and other government cash assistance Veterans benefits/ Veterans disability payments/ Dividends on veteran s life insurance loan Welfare benefits (including TANF) and food stamps Worker s compensation and similar payments (some exceptions may apply) Taxable Sometimes, Not Taxable Others Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are: Life insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person s death, are generally not taxable unless the policy was turned over to you for a price. Scholarship or fellowship grant If you are a candidate for a degree, you can exclude from income amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify for the exclusion. Non cash income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties. Caution: While it is not unlawful to fail to claim every deduction allowed under the Internal Revenue Code, it is unlawful to submit a frivolous or fraudulent return. In this case, knowingly failing to take deductions for income tax purposes in order to secure a tax credit would not be advisable, and in fact, may result in civil penalties. Income lists developed from several sources: UC Berkeley s MAGI Under the Affordable Care Act http://laborcenter.berkeley.edu/pdf/2013/magi_summary13.pdf Center for Budget and Policy Priorities Health Care Assister Guide to Tax Rules http://www.healthreformbeyondthebasics.org/wp content/uploads/2014/07/the Health Care Assister Guide to Tax Rules.pdf Tax Form 1040 http://www.irs.gov/pub/irs pdf/f1040.pdf Form 1040 Instructions http://www.irs.gov/pub/irs pdf/i1040.pdf 4

Tennessee Primary Care Association September 2014 5