Modified Adjusted Gross Income (MAGI) – IRS Definition and Explanation

What Is Modified Adjusted Gross Income (MAGI)?

Modified Adjusted Gross Income (MAGI) is an IRS-defined calculation used to determine eligibility for several federal tax benefits. Although MAGI is based on Adjusted Gross Income (AGI), the IRS adds back specific income items or exclusions to compute MAGI for different purposes. The IRS does not use one universal definition of MAGI. Instead, MAGI varies depending on the tax credit, deduction, or eligibility rule.
Although MAGI is based on Adjusted Gross Income (AGI), the IRS adds back specific income items or exclusions to compute MAGI.

IRS Uses of MAGI

The IRS uses MAGI to determine eligibility for several major tax benefits, including:

• Roth IRA contribution eligibility (Publication 590-A)
• Traditional IRA deduction limits (Publication 590-A)
• Premium Tax Credit (Form 8962 Instructions)
• Education credits such as the American Opportunity Credit and Lifetime Learning Credit
• Net Investment Income Tax thresholds
• Passive activity loss limitations

Because each program applies different adjustments, MAGI must be calculated according to the specific IRS rules for that topic.

Starting Point: Adjusted Gross Income (AGI)

All IRS versions of MAGI begin with Adjusted Gross Income (AGI), reported on Form 1040, Line 11. From AGI, the IRS requires taxpayers to add back certain exclusions or deductions, depending on the calculation being performed.

Common IRS Adjustments Used to Determine MAGI

Although MAGI definitions differ, several adjustments appear frequently in IRS guidance. Examples found in Publication 590-A and other IRS instructions include adding back:

• Foreign earned income and housing exclusion
• Foreign housing deduction
• Exclusion of interest from U.S. savings bonds used for education
• Exclusion of employer adoption assistance
• Deduction for traditional IRA contributions (when used to calculate IRA-related MAGI)
• Deduction for student loan interest
• Tuition and fees adjustment (if applicable under current law)

The required adjustments depend on which IRS program the MAGI calculation applies to.

Examples of IRS MAGI Calculations

1. MAGI for Roth IRA Contributions (Publication 590-A)

For Roth IRA eligibility, MAGI equals AGI plus:

• Foreign earned income exclusion
• Foreign housing exclusion or deduction
• Exclusion of interest from qualified U.S. savings bonds
• Exclusion of employer adoption assistance
• Any traditional IRA deduction

2. MAGI for the Premium Tax Credit (Form 8962 Instructions)

For the Premium Tax Credit, MAGI equals AGI plus:

• Tax-exempt interest
• Foreign earned income exclusion
• Foreign housing exclusion or deduction
• Social Security benefits not included in AGI

3. MAGI for Education Credits

For education benefits, MAGI adds back:

• Foreign earned income exclusion
• Foreign housing exclusion or deduction
• U.S. savings bond interest exclusion
• Employer adoption assistance exclusion

Why MAGI Is Important

MAGI determines eligibility for multiple federal tax benefits. The calculation affects:

• How much taxpayers may contribute to a Roth IRA
• Whether traditional IRA contributions are deductible
• Eligibility for education-related tax credits
• Eligibility for the Premium Tax Credit under the Affordable Care Act
• Qualification for certain passive activity and investment-related limits

Where to Find MAGI

The IRS does not report MAGI on a specific line of Form 1040. Instead, taxpayers calculate MAGI within the specific instructions for each credit or deduction. MAGI always begins with AGI from Form 1040, Line 11 and is adjusted only as required by the applicable IRS rules.

Official IRS Sources

• IRS Publication 590-A – Contributions to Individual Retirement Arrangements
• IRS Form 8962 Instructions – Premium Tax Credit
• IRS Form 1040 and Instructions
• IRS Education Credits guidance

M. Spik

Editor
25 years of experience managing tax, accounting, payroll, and employment-related information portals. Editor of Accounting Portal since 2011.
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