MAGI Phase-Out
Tax Glossary Term
Definition
A MAGI phase-out is a graduated reduction of a tax benefit as Modified Adjusted Gross Income rises above a statutory threshold. For each dollar of MAGI above the threshold, a set percentage of the benefit is clawed back until it reaches zero or a statutory floor. The OBBBA introduced several new phase-outs for 2026: the tips and overtime deductions phase out at 10.0% of MAGI above $150,000 for single and head-of-household filers, or $300,000 for married filing jointly. The senior bonus deduction has its own phase-out at 6.0% of MAGI above $75,000 for single filers or $150,000 for MFJ. The SALT cap phase-down operates at 30.0% of MAGI above $505,000, with a floor of $10,000. Other familiar MAGI phase-outs include the child tax credit ($2,200 per child in 2026) and IRA contribution deductibility. Phase-outs generally apply per dollar of excess income and the reduction is calculated as a percentage, not a cliff — the benefit declines smoothly rather than vanishing at a single threshold.
Example
Single filer, MAGI: $180,000, claiming tips deduction
Phase-out threshold (single): $150,000
MAGI excess: $180,000 − $150,000 = $30,000
Reduction: 10.0% × $30,000 = $3,000
Qualified tips: $20,000
Deduction after phase-out: $20,000 − $3,000 = $17,000