What Is Modified Adjusted Gross Income (MAGI)?

Your MAGI is an alternate measure of income that limits some tax breaks

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Definition

Your modified adjusted gross income (MAGI) is a measure of the money you make in a calendar year. This income number is your adjusted gross income (AGI) with certain deductions added back in. It's used to calculate whether you're eligible for tax breaks.

Key Takeaways

  • Your modified adjusted gross income (MAGI) is your adjusted gross income plus certain exclusions.
  • MAGI thresholds determine your ability to receive certain tax benefits, and they are often adjusted annually.
  • Some tax breaks that use your MAGI include the American Opportunity Tax Credit, the adoption tax credit, and the Lifetime Learning Credit.

How Modified Adjusted Gross Income (MAGI) Works

Your modified adjusted gross income is your adjusted gross income plus certain exclusions. For purposes of calculating the Adoption Tax Credit, adoption assistance programs, the American Opportunity Tax Credit, contributions to Coverdell Education Savings Accounts, and the Lifetime Learning Credit, the exclusions are:

  • Any foreign-earned income exclusion you claimed
  • Any housing exclusion you claimed
  • Any housing deduction you might have claimed

When MAGI is used for health care and marketplace insurance plans, it includes untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest.

Note

You must also add back in any income you excluded from taxation that you received from American Samoa, Guam, the Northern Mariana Islands, or Puerto Rico, if applicable.

There's no single overall definition of MAGI because your adjusted gross income can be modified in different ways for different purposes.

The Adoption Tax Credit and Assistance Programs

The amount of adoption-related expenses that can be refunded through the Adoption Tax Credit is limited or phased out if your MAGI is above certain thresholds. The maximum amount and exclusion per child is $14,890 for the 2022 tax year, and $15,950 for tax year 2023. The MAGI phaseout for the Adoption Tax Credit begins at $223,410 in the 2022 tax year and ends at $263,410.

Your MAGI can also limit the amount of adoption-related expenses you're eligible to claim for tax-free reimbursement from an employer assistance program. The same MAGI threshold limits that are used for the adoption credit are used for employer-provided adoption-assistance programs.

Note

The value of these tax breaks begins reducing at the first threshold, and taxpayers with MAGIs over the upper limit aren't eligible for these benefits at all.

Your MAGI appears on line 7 of Form 8839, which you must complete and submit to claim qualified adoption expenses. It also shows up on line 23 of Form 8839. It's used here to limit the amount of employer-provided benefits for adoption assistance reimbursement that can be excluded from federal income tax. 

The American Opportunity Tax Credit

The American Opportunity Tax Credit is a credit or qualified education expenses. Again, the amount of the credit is limited until it's ultimately phased out entirely if your MAGI exceeds certain thresholds.

The amount you are eligible for is gradually reduced if your MAGI is between $80,000 and $90,000 if you are a single taxpayer, and $160,000 and $180,000 if you file a joint return. You can't claim these tax breaks at all if your MAGI is over $90,000, or $180,000 for married joint filers.

Coverdell Education Savings Accounts

A Coverdell Education Savings Account works similarly to a 529 plan, in that it is a trust or custodial account set up solely for paying qualified education expenses for the designated beneficiary of the account. Your MAGI also limits the amount you can contribute to a Coverdell Education Savings Account on behalf of another individual.

Calculations for these accounts are made using Worksheet 7-1, "MAGI for a Coverdell ESA," found in IRS Publication 970. Again, the amount you can contribute tax-free is reduced or phased out if your MAGI is over certain thresholds.

The threshold amounts for Coverdell Education Savings Accounts are $95,000 to $110,000, increasing to $190,000 to $220,000 if you're married and filing a joint return.

Note

The total contributions for any one child cannot exceed $2,000 per tax year.

The Lifetime Learning Credit

You can calculate your MAGI for the Lifetime Learning Credit by using Worksheet 3-1 in IRS Publication 970. Again, if your MAGI is over a certain threshold, the amount of the credit you can claim is reduced or phased out—how much depends on your MAGI and your filing status. The amount of the reduction can be calculated on IRS Form 8863. This credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000, or $160,000 for married joint filers.

Student Loan Interest Tax Deduction

Your MAGI is your AGI with the following modifications for purposes of claiming the student loan interest tax deduction:

  • Less your deduction for student loan interest
  • Less any deduction you took for tuition and fees
  • Less any deduction for domestic production activities
  • Plus any foreign-earned income exclusion, housing exclusion, and housing deduction
  • Plus any exclusion of income from American Samoa, Guam, the Northern Mariana Islands, or Puerto Rico

Your modified adjusted gross income must be less than:

  • $85,000 if single, head of household, or qualifying widow(er)
  • $170,000 if married filing jointly

Your MAGI for this deduction can be calculated by using Worksheet 4-1 found in IRS Publication 970. The threshold amounts vary by year and by filing status. The limits for the student loan interest deduction for tax year 2022 are $85,000 for single filers and $175,000 for joint filers. For tax year 2023, the income limits are $90,000 for single filers and $185,000 for those who are married filing jointly.

Note

Those who use the married-filing-separately status aren't eligible to deduct student loan interest at all.

Deducting IRA Contributions

The calculation of your MAGI is also different and more complicated for purposes of determining your allowable tax deduction for contributions you've made to your individual retirement account (IRA). It's your adjusted gross income before you take the IRA deduction for this tax break, and after including any taxable Social Security benefits and applying the passive activity loss limitations to passive income. The following modifications also apply:

  • Add back any exclusion for savings bond interest
  • Add back adoption assistance excluded from income
  • Add back deduction for domestic production activities 
  • Add back any deduction for interest paid on student loans
  • Add back any deduction for tuition and fees
  • Add back any foreign-earned income exclusion, housing exclusion, and housing deduction

Your MAGI limits the amount you can deduct for contributions made to a traditional IRA if you're covered by a retirement plan through an employer. It can be calculated by using Worksheet 1-1, "Figuring Your Modified AGI," which can be found in IRS Publication 590-A.

The MAGI threshold amounts for this deduction vary by year and filing status, so you're best off calculating it by using the worksheet. For tax year 2022, single filers can take all or part of the deduction if they make less than $78,000, and $129,000 or less for married joint filers. For tax year 2023, those MAGI levels are $83,000 and $136,000.

Roth Individual Retirement Account (IRA) Eligibility

Depending on your MAGI, you might or might not be eligible to fund a Roth Individual Retirement Account (IRA). Your MAGI is your AGI with the following modifications for purposes of eligibility:

  • Less income from a Roth conversion
  • Plus any deduction for Traditional IRA contribution
  • Plus any exclusion for savings bond interest
  • Plus any adoption assistance excluded from income
  • Plus any deduction for domestic production activities
  • Plus any deduction for interest paid on student loans
  • Plus any deduction for tuition and fees
  • Plus any foreign-earned income exclusion, housing exclusion, and housing deduction

Your MAGI is used to determine whether you can—and how much you can—contribute to a Roth IRA. The threshold amounts vary by year and filing status.

For single filers, Roth IRA reductions begin at MAGIs of $129,000 for tax year 2022, and are completely eliminated at a MAGI of $144,000. For tax year 2023, those MAGI levels are $138,000 and $153,000.

For married taxpayers filing jointly, reductions begin at MAGIs of $204,000 for tax year 2022, and are eliminated at $214,000. For tax year 2023, those MAGI levels are $218,000 and $228,000.

Frequently Asked Questions (FAQs)

How do you calculate your modified adjusted gross income (MAGI)?

To calculate your modified adjusted gross income (MAGI), find your adjusted gross income (AGI) and add back in any IRA and student loan interest deductions, adoption expenses, rental losses, and any other items that you're eligible for. Your MAGI may be the same as your AGI or it may be higher.

What is modified adjusted gross income for Medicare?

Modified adjusted gross income for Medicare is used to determine the monthly premium you will pay for Part B and prescription drug coverage. The income thresholds are subject to change each year and are based on your tax filing status. For determining your MAGI for Medicare, you will take your total adjusted gross income and add in any tax-exempt interest income.

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