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robbystout
New Member

The MAGI for Medicaid is $16,242. My income was $22,568.46. Can I contribute to a Traditional IRA to reduce my income to meet the medicaid MAGI requirement?

I'm not totally sure how the MAGI is calculated.  For Example I have dividends (1099-DIV) that have created a cash balance of $918.82 over the last 2 years (not just 2016), and I don't know if that's included as income for the MAGI.

Here is the breakdown of the sources of my income:

W2                  $ 19,962

Tax Refunds   $? 186

1099-INT        $? 16

1099-DIV        $? 1,860

HSA Dist.       $? 544

Total               $? 22,568

I realize that the contribution limit for an traditional IRA is $5,500.  I guess I'm hoping some of this income doesn't count toward the MAGI.  Please help!

6 Replies
ToddL
New Member

The MAGI for Medicaid is $16,242. My income was $22,568.46. Can I contribute to a Traditional IRA to reduce my income to meet the medicaid MAGI requirement?

For Medicaid purposes, MAGI is adjusted gross income (AGI) plus these, if any: 

untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest.

A contribution to your Traditional IRA (same as Deductible IRA) does reduce your Medicaid MAGI. Contributions to a Traditional 401k also reduce your Medicaid MAGI.

See: https://www.healthcare.gov/income-and-household-information/income/

dmertz
Level 15

The MAGI for Medicaid is $16,242. My income was $22,568.46. Can I contribute to a Traditional IRA to reduce my income to meet the medicaid MAGI requirement?

The linked answer does not provide the method for calculating Medicaid MAGI.  A deductible IRA contribution can indeed reduce MAGI for Medicaid purposes.
robbystout
New Member

The MAGI for Medicaid is $16,242. My income was $22,568.46. Can I contribute to a Traditional IRA to reduce my income to meet the medicaid MAGI requirement?

Is there a difference between a Traditional IRA and a Deductible IRA?

Also, looking forward to 2017, do contributions to a 401K lower income for MAGI?
dmertz
Level 15

The MAGI for Medicaid is $16,242. My income was $22,568.46. Can I contribute to a Traditional IRA to reduce my income to meet the medicaid MAGI requirement?

Traditional IRA contributions can be deductible or nondeductible depending on MAGI for determining deductibility (the MAGI referred to in the answer above) of the contribution.  However, since you are asking about Medicaid MAGI, it seems that your MAGI for determining the deductibility of a traditional IRA contribution would certainly be low enough to allow a full deduction for a traditional IRA contribution.  Of course, to be able to make any traditional IRA contribution you must have sufficient eligible compensation to support the contribution.

Yes, elective deferrals to a 401(k) would reduce your W-2 taxable income (or would provide you with a self-employed retirement deduction) that would reduce your AGI and therefore reduce your both your Medicaid MAGI and your traditional IRA deductibility MAGI.
robbystout
New Member

The MAGI for Medicaid is $16,242. My income was $22,568.46. Can I contribute to a Traditional IRA to reduce my income to meet the medicaid MAGI requirement?

Do business expenses (sole prop) reduce MAGI?  Do dividends that are reinvested, but not in a 401K/IRA/Roth, count toward MAGI?
ToddL
New Member

The MAGI for Medicaid is $16,242. My income was $22,568.46. Can I contribute to a Traditional IRA to reduce my income to meet the medicaid MAGI requirement?

Business expenses (sole prop) reduce AGI (which also reduces MAG)I. Dividends that are reinvested, but not in a 401K/IRA/Roth, do not reduce MAGI.
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