Modified Adjusted Gross Income (MAGI)
Tax Glossary Term
Definition
MAGI is your Adjusted Gross Income (AGI) with certain deductions and income added back. The IRS uses MAGI as a measuring stick to decide whether you qualify for specific tax benefits, and if so, how much of those benefits you can claim. Depending on the provision, the add-backs may include tax-exempt municipal bond interest, excluded foreign earned income, deductions for student-loan interest, or the employer-provided adoption exclusion. Because different sections of the tax code define MAGI slightly differently, the exact add-backs depend on which credit or deduction is being tested. For most W-2 earners with no foreign income or tax-exempt interest, MAGI equals AGI. MAGI matters most for Roth IRA contribution eligibility, ACA premium tax credit calculations, OBBBA deduction phase-outs, Medicare Part B and Part D premium surcharges (IRMAA), the net investment income tax threshold, and the child tax credit phase-out. If your MAGI crosses a threshold, a benefit may shrink or disappear entirely, so knowing your MAGI before year-end gives you time to adjust contributions or defer income.
Example
Wages: $78,000
Student-loan interest deduction: -$2,000
AGI: 76,000
Add back tax-exempt municipal bond interest: +$4,000
MAGI: 80,000