While the term modified adjusted gross income, or MAGI, may strike you as just another piece of tax mumbo jumbo, mastering how to figure out your MAGI is crucial for unlocking various valuable tax perks. These include the ability to contribute to a Roth IRA, claim education-related tax credits, and more.
The process of determining your MAGI begins with your adjusted gross income (AGI), followed by adding back specific deductions or exclusions that the IRS excludes when assessing your eligibility for certain tax benefits.
Let’s unravel the workings of MAGI and how you can compute it accurately.
What Exactly Is Modified Adjusted Gross Income?
MAGI acts as a gatekeeper — it decides whether you’re eligible for a handful of tax advantages. Essentially, it’s your AGI sprinkled with some particular items that are folded back in.
Your AGI represents your total income reported on your tax forms — encompassing salaries, interest, dividends, and the like — after deducting some allowable adjustments such as:
- Contributions to retirement plans
- Student loan interest paid
- Alimony payments
Tax Insider Hint
Remember, AGI is calculated before subtracting your standard or itemized deductions. In contrast, your taxable income is what you get after those deductions are taken out.
MAGI, however, reinstates some deductions back into your AGI because the IRS doesn’t let those reduce your income when determining qualification for certain breaks. This means MAGI is a tougher yardstick for income used by the IRS to judge eligibility for tax credits and deductions. For instance, it might add back deductible student loan interest or employer adoption assistance that you previously subtracted.
Keep in mind two crucial points about MAGI:
- MAGI is not displayed anywhere on your Form 1040 tax return.
- You’ll need to calculate it manually or follow IRS worksheets for the relevant tax benefit.
Breaking Down the MAGI Calculation
The formula to arrive at your MAGI is straightforward:
- Start with your AGI (you can find this on line 11 of the 2024 Form 1040).
- Add back any deductions or income exclusions that the IRS excludes when determining eligibility for your desired tax benefit (we’ll get into specifics shortly).
- The figure you get after this is your MAGI for that particular tax purpose.
Common additions include:
- Foreign earned income exclusion
- Foreign housing exclusion
- Deductible student loan interest
- Interest from excluded U.S. savings bonds
- Employer-provided adoption benefits
For example, if you reduced your AGI by claiming the foreign earned income exclusion, MAGI requires you to add that income back in. The goal here is to strip away certain above-the-line deductions (those claimable without itemizing) to paint a clearer picture of your true income for IRS evaluation.
MAGI in Action: Examples of Its Impact
Roth IRA Contributions
Your eligibility to contribute to a Roth IRA is capped based on your MAGI. Surpass certain MAGI thresholds, and your chance to contribute fades.
The MAGI calculation for Roth IRA contributions includes:
- Income from conversions or rollovers into a Roth IRA
- Traditional IRA deductions
- Student loan interest deductions
- Foreign earned income or housing exclusions
- Excludable qualified savings bond interest
- Excluded employer-provided adoption assistance
To figure out your MAGI for Roth IRA purposes, you can consult “Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes” in IRS materials.
2025 Roth IRA MAGI Thresholds
| Single, Head of Household, or MFS (no cohabitation) | $150,000 | $165,000 |
| Married Filing Jointly or Qualified Surviving Spouse | $236,000 | $246,000 |
| Married Filing Separately (lived with spouse) | $0 | $10,000 |
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Deducting Traditional IRA Contributions
There’s a particular MAGI computation to decide how much of your traditional IRA contribution qualifies for a tax deduction. Here’s the gist:
- Anyone, regardless of income, can contribute to a traditional IRA.
- If you want to deduct that contribution, the rules depend on your and your spouse’s participation in employer retirement plans:
- If neither of you has a workplace retirement plan, you can deduct contributions without income restrictions.
- If either of you is covered by such a plan, MAGI limits determine eligibility for deductions.
To calculate MAGI for this purpose, start with your AGI before deducting any IRA contributions, then add back:
- Student loan interest deduction
- Foreign earned income or housing exclusions
- Savings bond interest excluded previously
- Employer-provided adoption benefits
IRS “Worksheet 1-1. Figuring your modified AGI” provides a formula tailored to this calculation.
2025 Traditional IRA Deduction Limits
| Single/Head of Household with Workplace Plan | $79,000 | $89,000 |
| Married Filing Jointly with Workplace Plan | $126,000 | $146,000 |
| Married Filing Jointly (no workplace plan) but Spouse Has One | $236,000 | $246,000 |
| Married Filing Separately with Workplace Plan | $0 | $10,000 |
MAGI and Education Tax Credits
To compute your MAGI for the American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit, add back to your AGI:
- Foreign earned income and/or housing exclusions
- Foreign housing deduction
- Income excluded by residents of American Samoa
- Income excluded by residents of Puerto Rico
Consult the IRS “Worksheet 2-1. MAGI for the American Opportunity Credit” to see the full breakdown. The same formula applies to the Lifetime Learning Credit.
Income Limits for Education Credits (2025)
| Married Filing Jointly | $160,000 | $180,000 |
| All Other Filers | $80,000 | $90,000 |
Final Thought: MAGI’s Role in Tax Benefits
Regardless of the tax advantage in question, the pattern remains consistent: your MAGI dictates your qualification. Stay beneath the income ceiling, and you’ll snag the full perk. Should you enter the phaseout zone, the benefit gradually diminishes — or vanishes altogether. Always cross-check IRS guidelines to grasp how MAGI influences each credit or deduction you’re after.
