Modified Adjusted Gross Income

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In U.S. tax law, modified adjusted gross income (MAGI) is the adjusted gross income (AGI), modified by various adjustments. There are various MAGIs, computed in different ways; the most used is Modified AGI for Roth IRA purposes, detailed in the instructions to Form 8606. Other MAGIs appear in Form 8839 (Qualified Adoption Expenses) and Form 8815 (Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued after 1989).

[edit] Modified AGI for Roth IRA purposes

The Modified AGI for Roth IRA purposes is used to determined how much can be contributed to certain personal retirement programs. The starting point to determine MAGI is adjusted gross income (AGI), which is basically total income minus certain adjustments.

Once AGI is determined, then under certain circumstances, taxpayers must calculate their modified adjusted gross income (MAGI). Among other situations, this calculation is called for in determining whether Roth IRA income limits have been reached, and therefore whether a Roth contribution can be made. Certain adjustments allowed in arriving at AGI are then added back to arrive at modified adjusted gross income.

Upward adjustments that modify AGI are generally made by disallowing deductions for passive activity losses, to include all rental losses, not allowing adjustments taken for tuition, fees, student loan interest paid, IRAs, nor the deduction for paying one-half of self-employment tax. Deductible money placed in a 401(K) is allowed.

Additionally, MAGI is raised by including interest earned from U.S. Savings Bonds that were used for higher education expenses (which is usually excluded income for simple AGI purposes).

Finally, the taxpayer's MAGI is lowered by excluding Taxable Social Security income received.