What is modified adjusted gross income (MAGI)?

An income calculation the IRS uses to find your eligibility for certain tax benefits

Derek Silva

By

Derek Silva

Derek Silva

Personal Finance Expert

Derek is a personal finance editor at Policygenius in New York City, and an expert in taxes. He has been writing about estate planning, investing, and other personal finance topics since 2017. He especially loves using data to tell a story. His work has been covered by Yahoo Finance, MSN, Business Insider, and CNBC.

Published August 13, 2021|6 min read

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Modified adjusted gross income (MAGI) is a calculation used by the IRS to determine whether you qualify to claim certain tax breaks — like the child tax credit, student loan interest deduction, and premium tax deduction — or to make IRA contributions. The IRS may also use your MAGI to determine whether you have to pay extra tax on certain types of investment income.

Your MAGI isn’t listed anywhere on your tax return, so you’ll need to calculate it yourself. The calculation also changes slightly depending on the type of tax break you’re trying to claim or the type of account you’re trying to contribute to. For many people, MAGI will be the same as AGI or slightly higher. Your MAGI is not the same as your total income or your taxable income.

Key Takeaways

  • Modified adjusted gross income is an income calculation that determines your eligibility to contribute to IRAs or to claim certain tax credits and deductions

  • Your MAGI is usually very similar to your AGI, which is on line 11 of your Form 1040, but your MAGI may be higher

  • Calculate your modified AGI by adding certain values to your AGI, but the exact values depend on what you’re using your MAGI for

How to calculate your modified adjusted gross income

To calculate your MAGI, you should first calculate your adjusted gross income (AGI), which is your total income minus the value of certain deductions or exclusions. You already need to calculate your AGI as part of your income tax return and you can find it on line 11 of your Form 1040. Then you can find your MAGI by adding certain values to your AGI. The values you add to your AGI will depend on how you’re going to use your MAGI, but many of the values on Schedule 1 are usually included in your MAGI even though they’re excluded from your AGI.

You can find more specific MAGI calculations later in this article, but this list includes the amounts that are generally excluded from your AGI but included in your MAGI:

  • Taxable Social Security benefits or railroad retirement benefits

  • Deductible contributions to an individual retirement account (IRA)

  • The self-employment tax deduction

  • The student loan interest deduction

  • The value of your education credits (AOTC or LLC)

  • The tuition and fees deduction

  • Certain interest from Series EE and Series I U.S. savings bonds if you used it to pay for qualified higher education expenses

  • Adoption assistance you received from your employer (check your Form 8839)

  • Passive activity income or loss that you listed on Form 8582

  • Rental real estate losses for certain real estate professionals

  • Losses from a publicly traded partnership (PTP)

  • Foreign income or foreign housing costs that you claimed on Form 2555

  • Income you earned as a resident of Puerto Rico or certain U.S. territories

Need more help filing your taxes? Use one of this year’s best tax filing services.

Calculate MAGI for IRA contributions

An individual retirement account (IRA) allows you to save for retirement without going through your employer, but you must meet the income requirements. Income limits for a traditional IRA or Roth IRA are based on your tax filing status and your modified adjusted gross income, which you can determine by finding your AGI and then adding the following values to it (if they apply to you):

  • Your IRA deduction, which you can find on line 19 of Schedule 1

  • Your student loan interest deduction, which is on line 20 of Schedule 1

  • Your tuition and fees deduction, which is on line 21 of Schedule 1

  • Any housing exclusion or foreign earned income exclusion that you claimed on line 45 of Form 2555

  • Any Foreign housing deduction, which is on line 50 of Form 2555

  • Interest you earned from a Series EE or Series I savings bond that you then used for qualified higher education expenses; find this value on line 14 of Form 8815

  • Any employer-provided adoption benefits, as per line 28 of Form 8839

Learn more about how IRAs work and who should use them.

Calculate MAGI for the unemployment compensation exclusion

The American Rescue Plan Act of 2021 exempts up to $10,200 of unemployment benefits from tax, for people who received unemployment compensation in 2020. To qualify for the full unemployment compensation exclusion, your MAGI must be less than $150,000 (no matter your filing status). For MAGIs above $150,000, the amount of unemployment income you can exclude will decrease until it reaches $0.

To calculate MAGI for the unemployment compensation exclusion, find your AGI and then add the following if they apply to you:

  • Your taxable Social Security benefits

  • The IRA deduction

  • The student loan interest deduction

  • Excludable interest from Series EE and I U.S. Savings Bonds (Form 8815)

  • Employer-provided adoption benefits (Form 8939)

  • The tuition and fees deduction

  • Your deduction of up to $25,000 for participation in passive rental real estate activity (Form 8582)

  • The value of Olympic or Paralympic medals and any United States Olympic & Paralympic Committee prize money

Learn more about taxes on unemployment benefits.

Calculate MAGI for tax credits & deductions

Your eligibility for a handful of tax credits is determined by your modified adjusted gross income. In each case, your MAGI is determined by finding your AGI, which already excludes the value of certain types of income and tax breaks, and then adding some of those values back into your AGI. The process of determining your AGI is always very similar but there may be slight variations depending on the exact tax credit or deduction you’re applying for.

The following tax credits and deductions require your modified adjusted gross income:

  • Student loan interest deduction

  • Child tax credit (CTC)

  • Premium tax credit (PTC)

  • American opportunity tax credit (AOTC)

  • Lifetime learning credit (LLC)

  • Tuition and fees deduction

  • Saver’s credit

Related: 53 tax credit and deductions you can claim in 2021

Calculate MAGI for the student loan interest deduction

The student loan interest deduction lets taxpayers deduct up to $2,500 of student loan interest they paid during the year. As your modified AGI increases, the maximum amount that you can deduct will decrease. This is an above-the-line deduction, so you can claim it even if you claim the standard deduction. Find your MAGI for the student loan interest deduction by adding these amounts, if they apply to you, to your AGI:

  • Foreign earned income exclusion, as listed on line 45 of Form 2555

  • Foreign housing exclusion, as included in line 45 of Form 2555

  • Foreign housing deduction, as listed on line 50 of Form 2555

  • Income you earned as a resident of Puerto Rico

  • Income you earned as a resident of American Samoa, as on line 15 of Form 4563

Calculate MAGI for the child tax credit

The 2021 child tax credit (CTC) is worth up to $3,600 per child for parents but your modified adjusted gross income must fall within certain limits for you to receive a full or partial credit. The CTC is also coupled with the credit for other dependents (ODC), which is worth up to $500 per dependent who doesn’t otherwise qualify for the CTC (one example is an adult parent whom you care for).

To determine your MAGI for the child tax credit, take your AGI and then add the value of any of these that apply to you:

  • Foreign earned income or housing exclusion, as on line 45 or 50 of Form 2555

  • Income you earned as a resident of American Samoa, as per line 15 of Form 4563

  • Income you earned in Puerto Rico that is otherwise excluded from your AGI (check any Form 499R-2 or Form W-2PR you received)

If none of these three applies to you, then your MAGI will be the same as your AGI.

Calculate MAGI for the premium tax credit

The premium tax credit (PTC) is available to taxpayers who bought a health insurance plan through the Obamacare marketplace but who need help paying their health insurance premiums. Your eligibility for the PTC depends on your MAGI. Modified adjusted gross income for the PTC is calculated as your AGI plus the following:

  • Any tax-exempt interest you have, which you can find on line line 2a of your Form 1040

  • Any amount you claim on lines 45 and 50 of Form 2555, which include the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction)

Calculate MAGI for education credits

The two education credits — the American opportunity tax credit (AOTC) and the lifetime learning credit (LLC) — apply to tuition costs and some other qualified education expenses you made during the year. Eligibility is determined by MAGI. To calculate your MAGI for the AOTC or LLC, you should take your AGI and then add back in the value of the following (if you have them):

  • Foreign earned income exclusion, as listed on line 45 of Form 2555

  • Foreign housing exclusion, as included in line 45 of Form 2555

  • Foreign housing deduction, as listed on line 50 of Form 2555

  • Income you earned as a resident of Puerto Rico

  • Income you earned as a resident of American Samoa, as on line 15 of Form 4563

Once you calculate your MAGI, you will also need to write it on Form 8863. Note that nonresident aliens will have to make a slightly different MAGI calculation, which they can find in IRS Publication 970.

Calculate MAGI for the tuition and fees deduction

The tuition and fees deduction allows a tax filer to deduct up to $4,000 for college tuition and other fees paid during the year. To find your MAGI and determine your eligibility for the tuition and fees deduction, start with your AGI and add these amounts, if they apply to you:

  • Foreign earned income exclusion, from line 45 of Form 2555

  • Foreign housing exclusion, as included in line 45 of Form 2555

  • Foreign housing deduction, from line 50 of Form 2555

  • Income you earned as a resident of Puerto Rico

  • Income you earned as a resident of American Samoa, as on line 15 of Form 4563

Calculate MAGI for the saver’s credit

The saver’s credit (also known as the retirement savings contributions credit) allows you to deduct your contributions to a retirement account if your income falls below a certain threshold. That threshold is your AGI plus any amount you claim from the following:

  • The foreign earned income exclusion, as listed on line 45 of Form 2555

  • The foreign housing exclusion or deduction, as shown on lines 45 and 50 of Form 2555

  • Income you earned as a resident of Puerto Rico

  • Income you earned as a resident of American Samoa, as on line 15 of Form 4563

Calculate MAGI for the net investment income tax

If you have capital gains income above a certain amount, it’s subject to an additional 3.8% tax called the net investment income tax (NIIT). The exact income threshold for paying NIIT depends on your filing status and your modified AGI. Your MAGI for net investment income tax is your AGI plus income you excluded under section 911, plus adjustments for people who owned stock in certain controlled foreign corporations (CFCs) or passive foreign investment companies (PFICs).

To find your exact NIIT liability, use the worksheets and instructions for IRS Form 8960.

Calculate MAGI for Coverdell ESA contributions

A Coverdell ESA is a type of trust or similar account that helps someone save and pay for the education expenses of a dependent or other beneficiary. A Coverdell ESA is similar to a 529 college savings plan, but how much you can contribute is based on your MAGI. Your MAGI for a Coverdell ESA is your AGI plus the value of the following, if they apply to you:

  • Foreign earned income exclusion, from line 45 of Form 2555

  • Foreign housing exclusion, as included in line 45 of Form 2555

  • Foreign housing deduction, from line 50 of Form 2555

  • Income you earned as a resident of Puerto Rico

  • Income you earned as a resident of American Samoa, as on line 15 of Form 4563