What Is Modified Adjusted Gross Income (MAGI)?

Modified adjusted gross income (MAGI) is an important number. First of all, it determines whether you can contribute to a Roth IRA and whether you can deduct IRA contributions. It also factors into your eligibility for certain education tax benefits and income tax credits. Furthermore, it establishes your eligibility for income-based Medicaid and subsidized health insurance plans on the Health Insurance Marketplace.

Still, as important as this number is, you won’t find it on your tax return. You’ll have to crunch some numbers to find your MAGI.

MAGI can be defined as your household’s adjusted gross income with any tax-exempt interest income and certain deductions added back. The Internal Revenue Service (IRS) uses MAGI to establish whether you qualify for certain tax benefits. Most notably, MAGI determines:

For example, you can contribute to a traditional IRA no matter how much money you earn. However, you can’t deduct those contributions when you file your tax return if your MAGI exceeds limits set by the IRS and you and/or your spouse have a retirement plan at work.

Key Takeaways

  • Your MAGI determines if—and how much—you can contribute to a Roth IRA and whether you can deduct your traditional IRA contributions.
  • To calculate your modified adjusted gross income (MAGI), take your adjusted gross income (AGI) and add back certain deductions.
  • It’s normal for your AGI and MAGI to be similar.
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Modified Adjusted Gross Income (MAGI)

How Modified Adjusted Gross Income Works

Determining your MAGI is a three-step process:

  1. Figure out your gross income for the year
  2. Calculate your adjusted gross income (AGI)
  3. Add back certain deductions to calculate your MAGI

Figure out your gross income

Your gross income includes everything you earned during the year from:

  • Alimony
  • Business income
  • Capital gains
  • Dividends
  • Interest
  • Farm income
  • Rental and royalty income
  • Retirement income
  • Tips
  • Wages

There are two scenarios in which alimony payments are not considered gross income. The first is if your divorce agreement was executed after 2018. The second is if your divorce agreement was executed before 2019 but later modified to expressly state that such payments are not deductible for the payer.

Your gross income appears on line 9 of Form 1040.

Calculate your AGI (or find it on your tax return)

Your adjusted gross income (AGI) is important because it’s the total taxable income calculated before itemized or standard deductions, exemptions, and credits are taken into account. It dictates how you can use various tax credits and exemptions. For example, AGI affects the amount of money you can claim for the child tax credit.

Your adjusted gross income is equal to your gross income, less certain tax-deductible expenses, including:

  • Certain business expenses for performing artists, reservists, and fee-basis government officials
  • Educator expenses
  • Half of any self-employment taxes
  • Health insurance premiums (if you’re self-employed)
  • Health savings account (HSA) contributions
  • Moving expenses for members of the armed forces moving due to active duty
  • Penalties on early withdrawal of savings
  • Retirement plan contributions (including IRAs and self-employed retirement plan contributions)
  • Student loan interest
  • Tuition and fees

You can do the math to figure out your AGI, or you can find it on line 11 of Form 1040.

Add back certain deductions

To find your MAGI, take your AGI and add back:

  • Any deductions you took for IRA contributions and taxable Social Security payments
  • Excluded foreign income
  • Interest from EE savings bonds used to pay for higher education expenses
  • Losses from a partnership
  • Passive income or loss
  • Rental losses
  • The exclusion for adoption expenses

Many of these deductions are not commonly used, so your MAGI and AGI could be similar or even identical.

Special Considerations for MAGI

Roth IRAs

To contribute to a Roth IRA, your MAGI must be below the limits specified by the IRS. If you’re within the income threshold, the actual amount you can contribute is also determined by your MAGI. If your MAGI exceeds the allowed limits, your contributions are phased out.

Here are the Roth IRA income limits for 2019:

Roth IRA Income Limits
If your filing status is… And your modified AGI is… You can contribute…
Married filing jointly or qualifying widow(er) Less than $193,000 Up to the limit
  More than $193,000 but less than $203,000 A reduced amount
  $203,000 or more Zero
Single, head of household, or married filing separately and you didn't live with your spouse at any time during the year Less than $122,000 Up to the limit
  More than $122,000 but less than $137,000 A reduced amount
  $137,000 or more Zero
Married filing separately and you lived with your spouse at any time during the year Less than $10,000 A reduced amount
  $10,000 or more Zero

Here's a rundown of Roth IRA income limits for 2020:

Roth IRA Income Limits
If your filing status is… And your modified AGI is… You can contribute…
Married filing jointly or qualifying widow(er) Less than $196,000 Up to the limit
  More than $196,000 but less than $206,000 A reduced amount
  $206,000 or more Zero
Single, head of household, or married filing separately and you didn't live with your spouse at any time during the year Less than $124,000 Up to the limit
  More than $124,000 but less than $139,000 A reduced amount
  $139,000 or more Zero
Married filing separately and you lived with your spouse at any time during the year Less than $10,000 A reduced amount
  $10,000 or more Zero

Note that if you contribute more than you’re allowed, you have to remove the excess contributions. Otherwise, you’ll face a tax penalty. Excess contributions are taxed at a rate of 6% per year for as long as the excess amount remains in your IRA.

Traditional IRAs

Your MAGI and whether you and your spouse have retirement plans at work determine whether you can deduct traditional IRA contributions. If neither spouse is covered by a plan at work, you can take the full deduction up to the amount of your contribution limit. However, if either spouse has a plan at work, your deduction could be limited.

Here's a rundown of traditional IRA income limits for 2019:

Traditional IRA Income Limits
If your filing status is… And your modified AGI is… Then you can take…
Single, head of household, qualifying widow(er), married filing jointly or separately and neither spouse is covered by a plan at work Any amount A full deduction up to the amount of your contribution limit
Married filing jointly or qualifying widow(er) and you're covered by a plan at work $103,000 or less A full deduction up to the amount of your contribution limit
  More than $103,000 but less than $123,000 A partial deduction
  $123,000 or more No deduction
Married filing jointly and your spouse is covered by a plan at work $193,000 or less A full deduction up to the amount of your contribution limit
  More than $193,000 but less than $203,000 A partial deduction
  $203,000 or more No deduction
Single or head of household and you're covered by a plan at work $64,000 or less A full deduction up to the amount of your contribution limit
  More than $64,000 but less than $74,000 A partial deduction
  $74,000 or more No deduction
Married filing separately and either spouse is covered by a plan at work Less than $10,000 A partial deduction
  $10,000 or more No deduction

Here's a rundown of traditional IRA income limits for 2020:

Traditional IRA Income Limits
If your filing status is… And your modified AGI is… Then you can take…
Single, head of household, qualifying widow(er), married filing jointly or separately and neither spouse is covered by a plan at work Any amount A full deduction up to the amount of your contribution limit
Married filing jointly or qualifying widow(er) and you're covered by a plan at work $104,000 or less A full deduction up to the amount of your contribution limit
  More than $104,000 but less than $124,000 A partial deduction
  $124,000 or more No deduction
Married filing jointly and your spouse is covered by a plan at work $196,000 or less A full deduction up to the amount of your contribution limit
  More than $196,000 but less than $206,000 A partial deduction
  $206,000 or more No deduction
Single or head of household and you're covered by a plan at work $65,000 or less A full deduction up to the amount of your contribution limit
  More than $65,000 but less than $75,000 A partial deduction
  $75,000 or more No deduction
Married filing separately and either spouse is covered by a plan at work Less than $10,000 A partial deduction
  $10,000 or more No deduction

Tax laws are complicated and do change periodically. If you need help figuring out your MAGI, or if you have any questions about IRA contribution and income limits, contact a trusted tax professional.

Frequently Asked Questions

How do I calculate my modified adjusted gross income (MAGI)?

Calculating your MAGI is relatively straightforward. To do so, first calculate your adjusted gross income (AGI) and then add back any of the deductions specified by the IRS that apply to your situation. Examples of these deductions include income from foreign sources, interest from certain savings bonds, and expenses related to adopting a child. Because MAGI involves adding back these deductions, MAGI will always be greater than or equal to AGI.

What purpose does MAGI serve?

The IRS uses MAGI to determine whether you qualify for certain tax programs and benefits. For instance, it helps determine the size of your Roth IRA contributions. Knowing your MAGI can also help avoid facing tax penalties because over-contributing to these programs and others like them can trigger interest payments and fines. Your MAGI can also determine eligibility for certain government programs, such as the subsidized insurance plans available on the Health Insurance Marketplace. 

Can MAGI and AGI be the same?

Yes, MAGI and AGI can be the same. For many people, the list of deductions that need to be added back to AGI in order to calculate MAGI will not be relevant. For instance, those who did not earn any foreign income would have no reason to use that deduction and would not add back those earnings to their AGI. For them, AGI and MAGI would therefore be the same number.