Modified Adjusted Gross Income: Difference between revisions

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In U.S. tax law, modified adjusted gross income (MAGI) is used to determined how much can be contributed to certain personal retirement programs. The starting point to determine MAGI, is the adjusted gross income (AGI). Adjusted gross income is basically total income minus certain adjustments.

Once AGI is determined, then under certain circumstances, taxpayers must calculate their modified adjusted gross income (MAGI). Among other situations, this calculation is called for in determining whether Roth IRA income limits have been reached, and therefore whether a Roth contribution can be made. Certain adjustments allowed in arriving at AGI are then added back to arrive at modified adjusted gross income.

Upward adjustments that modify AGI are generally made by disallowing deductions for passive activity losses, to include all rental losses, not allowing adjustments taken for tuition, fees, student loan interest paid, IRAs, nor the deduction for paying one-half of self-employment tax. Deductible money placed in a 401(K) are allowed (i.e. Roth 401(K)).

Additionally, MAGI is raised by including interest earned from U.S. Savings Bonds that were used for higher education expenses (which is usually excluded income for simple AGI purposes).

Finally, the taxpayer's MAGI is lowered by excluding Taxable Social Security income received.

External links

IRS webpage

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 In [[Taxation in the United States|U.S. tax law]], '''modified adjusted gross income''' '''(MAGI)''' is used to determined how much can be contributed to certain personal retirement programs.  The starting point to determine MAGI, is the [[adjusted gross income]] (AGI).  Adjusted gross income is basically total income minus certain adjustments.
-Once AGI is determined, then under certain circumstances, taxpayers must calculate their modified adjusted gross income (MAGI).  Among other situations, this calculation is called for in determining whether [[Roth IRA]] income limits have been reached, and therefore whether a Roth contribution can be made.   Certain deductions allowed in arriving at AGI are then ''added back'' to arrive at modified adjusted gross income.
+Once AGI is determined, then under certain circumstances, taxpayers must calculate their modified adjusted gross income (MAGI).  Among other situations, this calculation is called for in determining whether [[Roth IRA]] income limits have been reached, and therefore whether a Roth contribution can be made.   Certain adjustments allowed in arriving at AGI are then ''added back'' to arrive at modified adjusted gross income.
-Upward adjustments that modify AGI are generally made by disallowing deductions for [[Passive income|passive activity]] losses, to include all rental losses, not allowing deductions taken for tuition, fees, student loan interest paid, IRA deductions, nor the deduction for paying one-half of self-employment tax.  Deductible money placed in a 401(K) are allowed (i.e. [[Roth 401k|Roth 401(K)]]).
+Upward adjustments that modify AGI are generally made by disallowing deductions for [[Passive income|passive activity]] losses, to include all rental losses, not allowing adjustments taken for tuition, fees, student loan interest paid, IRAs, nor the deduction for paying one-half of self-employment tax.  Deductible money placed in a 401(K) are allowed (i.e. [[Roth 401k|Roth 401(K)]]).
 Additionally, MAGI is raised by including interest earned from [[Savings Bond|U.S. Savings Bonds]] that were used for higher education expenses (which is usually excluded income for simple AGI purposes).