How do I estimate my income?

Step 1. Start with your household’s adjusted gross income (AGI) from your most recent federal income tax return.

• Your AGI is your total (or “gross”) income for the tax year, minus certain adjustments you’re allowed to take. Adjustments include deductions for conventional IRA contributions, student loan interest, and more. Adjusted gross income appears on IRS Form 1040, line 11.

AGI income sources (to ADD together):

• Self-employment and business income
• Form W-2 wages, salary & tips
• Taxable interest and dividends
• Unemployment Compensation
• Taxable Social Security benefits
• Alimony payments you receive
• Capital gains & losses
• Rental / Schedule K1 income & losses
• Taxable amount from Pensions & IRAs
• Taxable state refunds
• Other income not exempted from the income tax

AGI deductions (to SUBTRACT from the income calculated above):

• Business deductions: The IRS allows you to deduct any purchases you made related to your self-employment that are considered typical of your industry or necessary for you to do your job.
• Other self-employment deductions
  

  • One-half of self-employment tax

  • Self-employed health insurance deduction

  • Self-employed SEP, SIMPLE and qualified plans
• Personal deductions:
  • Alimony paid
  • Student loan interest
  • IRA Contributions (If no retirement account through a job)
  • Educator Expenses (Teaching supplies paid out-of-pocket) 
  • Tuition Cost 
  • Moving Expenses (for Armed Forces members only)
  • Health Savings Account deduction

Note: 

• Do NOT include: Child support, gifts, supplementary security, veterans disability payments, workers’ compensation, proceeds from loan.
• Do NOT deduct: Charitable contributions, child/dependent care expenses, child support payments, HSA Deposits, medical expenses, mortgage interest, property taxes, state income taxes, etc. 

• Tax-exempt foreign income
• Tax-exempt Social Security benefits (including tier 1 railroad retirement benefits)
• Tax-exempt interest

• Expected raises
• New jobs or other employment changes, including changes to work schedule or self-employment income
• Changes to income from other sources, like Social Security or investments
• Changes in your household, like gaining or losing dependents. Gaining or losing a dependent can have a big impact on your savings.

Stride Tip!

• Utilize the Stride app to easily keep track of your deductions for the year!
• Not sure if something is deductible? Check out our Stride guides.  

Example income estimate calculation

1. In this example, a ride-share driver earns $51,000:

• However they spend $2,000 on expenses including parking fees, water bottles for passengers, a Spotify subscription, and a percentage of their cell phone bill.
• They've been tracking their mileage, and have driven 16,071 miles total. They'll get $.56 for every mile driven for self-employment work, so they get another $9,000 deduction on top of that $2,000.

When they take these deductions off their total earning, they have their business profit: $40,000.

2. They also make IRA contributions of $6,200 every year. Since an IRA contribution is a personal deduction, you can subtract the amount that you pay in contributions from your gross income.

$40,000-$6,200 (personal deductions) = $33,800 (AGI)

3. Last step would be to subtract any other qualifying deductions such as non-taxable Social Security benefits, tax-exempt interest, and foreign income. If you don't have any of those deductions, you're done!

MAGI = $40,000 - $6,200 - (other qualifying deductions) = $33,800 

• If this person was applying for health insurance, they would put $33,800 as their total income instead of the starting amount of $51,000.

Here’s our point: The money you earn is not the same as your MAGI. Accurately reporting these deductions can help you qualify for a larger subsidy which will increase the amount you save on healthcare!