614 How to Calculate Income Eligibility Using MAGI
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614 How to Calculate Income Eligibility Using MAGI

 

 

Revised 01/07/2025

Policy

Modified Adjusted Gross Income (MAGI) policy is used for the following AHCCCS Medical Assistance (MA) programs:

 

To qualify, the counted income of the customer’s MAGI budget group minus any allowable deductions cannot be more than the income standard for the MA program and the size of the budget group. 

NOTE     People living in the same home may have different budget groups and MA categories. Income eligibility is determined for each person based on their budget group and category.

See MA602D for MAGI budget group policy.

See MA615 for the income limits for MAGI groups.

 

1) Whose Income is Counted?

In general, the counted income of everyone in the budget group is totaled and compared to the income standard for the size of the budget group. However, the income of children under age 19 and tax dependents are excluded in some situations. See the table below for details:

If…

Then…

The person meets all the following conditions:

  • Is age 18 or younger;

  • Is included in the budget group of his or her custodial parent; AND

  • Has income for the current year but it is expected to be too low to have to file a tax return.

See Tax Rules for Children and Dependents for who has to file a return.
 

Exclude the income of the person in the budget group that includes both the child AND the child’s parent or parents.

See Counting Income of Children example.
 

The person has income for the current year, but it is expected to be too low to have to file a tax return; AND

Meets one of the following conditions:

  • Will be claimed by a non-custodial parent;

  • Lives in a household where both parents are present, but they plan to file separate tax returns; OR

  • Will be claimed by someone other than a spouse or parent.

See Tax Rules for Children and Dependents for who has to file a return.

Exclude the income of the dependent child

See Income of Children and Tax Dependents for MAGI example.
 

The person:

  • Is age 19 or older; 

  • Has income for the current year but it is expected to be too low to have to file a tax return; AND

  • Will be claimed as a tax dependent by a spouse or parent. 

See Tax Rules for Children and Dependents for who has to file a return

Exclude the income of tax dependent. 

See Income of Children and Tax Dependents for MAGI.
 

 

2) Income Eligibility Calculation

The MAGI income eligibility calculation may be a two-part process. If the income is too high using MAGI rules, a second income test is run using Premium Tax Credit rules. The income standard for the second test is 100% of the FPL.

The following steps are used to determine income eligibility for coverage groups that use MAGI:

Step

Action

1

Add up the monthly countable earned and unearned income of all members of the MAGI budget group whose income must be included.

2

To calculate the budget group’s total countable income:

  • Subtract any pre-tax deductions from income.

  • Subtract any adjustments to gross income.

NOTE     See MA609C for policy about these deductions.

3

Compare the total countable income to the income standard for the budget group size and MAGI program.

  • If the income is less than or equal to the income standard, STOP. The customer is income eligible.

  • If income is more than the income standard, continue to Step 4.

4

Subtract the 5% FPL disregard amount for the budget group size from the remaining income from Step 3. See MA609C.3 for the 5% FPL Table.

5

Compare the remaining income from Step 4 to the income standard for the budget group size and MAGI program.

  • If the income is less than or equal to the income standard, STOP. The customer is income eligible.

  • If income is more than the income standard, continue to Step 6.

6

Add up the countable earned and unearned income of all members of the Tax Filing Group who expect to be required to file a tax return for the current year.

7

Any taxable income listed below that the Tax Filing Group got or expects to get during the current calendar year that was NOT already counted in Step 5 is added:

  • Lump sum payments;

  • Scholarships, awards, or fellowship grants; and

  • Taxable amounts of payments to American Indians or Alaska Natives from trusts, settlements, property rights, and use of natural resources.

NOTE     For any payments received less often than monthly, the total amount that will be received for the year will be divided by 12 to get a monthly amount before adding it to the total from Step 5.

8

The total monthly income from Step 7 is compared to 100% FPL for the number of people in the Tax Filing Group. If the total monthly income for the Tax Filing Group is less than 100% FPL, the person passes the income test.

 

Definitions

Term

Definition

Tax Filing Group

The taxpayer and everyone claimed by the taxpayer as a dependent.

Child

A person under the age of 19.

Parent

A natural or adoptive parent or stepparent.

Pre-tax deductions

Deductions from income that are taken before taxes are deducted from the income. Common pre-tax deductions include deductions for health insurance premiums, contributions to 401(k) retirement plans, and life insurance premiums.

Tax Dependent

A person claimed as a dependent on someone else’s tax return. This includes a person who chooses to or must file a tax return of their own.

Taxpayer

A person who:

  • Expects to file a tax return for the current year, and

  • Will not be claimed as a tax dependent by someone else.

NOTE     Spouses who file a joint return and are not claimed as tax dependents by someone else are both considered taxpayers.

 

Legal Authority

This requirement applies to the following programs:

Program

Legal Authorities

Adult

Caretaker Relative

Pregnant Women

Child

KidsCare

42 USC 1396a(e)(14)

42 USC 1397bb(b)

42 CFR 435.603

42 CFR 457.300 and 301