Modified Adjusted Gross Income Calculator
Use our MAGI calculator to calculate your modified adjusted gross income.
Modified Adjusted Gross Income:
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How to Calculate Modified Adjusted Gross Income
Modified adjusted gross income (MAGI) is a key metric used by the Internal Revenue Service (IRS) and other agencies to determine an individual’s or household’s financial standing. MAGI is your adjusted gross income (AGI) with some additional adjustments and deductions added back.
You can use the following formula to calculate your modified adjusted gross income:
MAGI = AGI – adjustments + deductions added back
Thus, you can calculate your modified adjusted gross income in a few easy steps.
Step One: Calculate Your Adjusted Gross Income
Because modified adjusted gross income is based on adjusted gross income, the first step in calculating your MAGI is to calculate your AGI. You can use an AGI calculator, or do the following.
First, calculate your gross income, which is the income you receive from wages, salaries, tips, dividends, interest income, rental income, business income, and any other form of taxable income.
Then, subtract above-the-line deductions, which are deductions for retirement accounts, self-employed health insurance premiums, student loan interest, alimony, and educator expenses.
Finally, account for adjustments to find your AGI. AGI-specific adjustments are deductible contributions to HSAs, the deductible portion of self-employment tax, contributions to self-employed retirement plans, tuition for school, and educator expenses.
Step Two: Add Back Certain Deductions
Some deductions that you previously subtracted from your income to account for your AGI need to be added back in to calculate your MAGI.
These deductions include student loan interest, tuition, IRA contributions, social security payments, passive income losses, and deductible contributions to health savings accounts.
Step Three: Determine Exclusions or Additions to Income
Certain income sources need to be included or excluded from your AGI to calculate your MAGI.
If you received income from tax-exempt interest, such as municipal bonds or certain savings accounts, add it back to your AGI.
If you claimed the foreign earned income exclusion, which allows a portion of income earned abroad to be excluded from taxation, add the excluded amount back to your AGI.
If you deducted contributions made to a Traditional IRA on your tax return, add those amounts back to your AGI.
It’s important to note that different tax forms and programs may have slight variations in how they calculate MAGI, so you’ll need to review the specific guidelines and requirements for each when filing.
While it is possible to calculate MAGI on your own, we strongly recommend working with a financial professional to ensure your calculations are accurate.
Frequently Asked Questions
What is the purpose of calculating MAGI?
Modified adjusted gross income (MAGI) is a key metric used by the Internal Revenue Service (IRS) and other agencies to determine an individual’s or household’s financial standing.
What deductions are added back to calculate MAGI?
Deductions that need to be added back to calculate MAGI include student loan interest, tuition, IRA contributions, social security payments, passive income losses, and deductible contributions to health savings accounts.
These deductions are subtracted from gross income to calculate adjusted gross income, but must be added back to calculate MAGI.
What income sources are included or excluded from MAGI?
There are certain things that must be included or excluded from MAGI separate from adding back deductions. Income from tax-exempt interest, such as municipal bonds or certain savings accounts, as well as contributions made to traditional IRA accounts must be added back.
If you claimed the foreign earned income exclusion, which allows a portion of income earned abroad to be excluded from taxation, add the excluded amount back to your AGI.
There are other items that are required to be included or excluded based on the tax form and program you are using, so be sure to check the requirements.
Are there different calculations for MAGI in different situations?
There are different tax forms and programs that all have slight variations in how they calculate MAGI, so you’ll need to review the specific guidelines and requirements for each when filing. It’s also suggested to work with a financial professional to ensure your calculations are correct.