MAGI Calculator
Use this calculator to estimate your Modified Adjusted Gross Income (MAGI). MAGI is a crucial figure used to determine eligibility for various tax benefits, deductions, and programs, such as Affordable Care Act (ACA) subsidies, Roth IRA contribution limits, and certain Medicare premium adjustments.
Your Estimated Modified Adjusted Gross Income (MAGI):
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Modified Adjusted Gross Income (MAGI) is a key financial metric that plays a significant role in determining your eligibility for various tax credits, deductions, and government programs. While it starts with your Adjusted Gross Income (AGI), MAGI adds back certain deductions and exclusions that were previously subtracted from your gross income.
Why is MAGI Important?
MAGI is not a single, universally defined term; its exact calculation can vary slightly depending on the specific program or tax benefit it's being used for. However, some of the most common uses include:
- Affordable Care Act (ACA) Subsidies: Your MAGI is crucial for determining eligibility for premium tax credits and cost-sharing reductions that help make health insurance more affordable.
- Roth IRA Contributions: There are income limits for contributing to a Roth IRA, and these limits are based on your MAGI.
- Medicare Premiums (IRMAA): Higher-income individuals may pay higher Medicare Part B and Part D premiums, known as Income-Related Monthly Adjustment Amounts (IRMAA), which are based on MAGI.
- Student Loan Interest Deduction: While the deduction itself reduces your AGI, your MAGI can affect other aspects of your financial planning.
- Net Investment Income Tax (NIIT): This 3.8% tax on certain investment income applies to individuals with MAGI above specific thresholds.
How is MAGI Calculated?
Generally, MAGI begins with your Adjusted Gross Income (AGI) and then adds back specific items. Common add-backs include:
- Tax-Exempt Interest: Interest income from municipal bonds, which is typically tax-free at the federal level, is often added back for MAGI calculations.
- Excluded Foreign Earned Income: If you live and work abroad, you might exclude a portion of your foreign earned income from your taxable income. This excluded amount is usually added back for MAGI.
- Deduction for Traditional IRA Contributions: If you deduct contributions to a traditional IRA, this deduction is typically added back to your AGI to arrive at MAGI.
- Deduction for Student Loan Interest: The amount you deduct for student loan interest is often added back.
- Other potential add-backs (depending on the specific MAGI definition): These can include deductions for one-half of self-employment tax, passive activity losses, rental losses, and certain non-taxable Social Security benefits.
Example Calculation:
Let's say you have the following:
- Adjusted Gross Income (AGI): $60,000
- Tax-Exempt Interest: $1,000
- Excluded Foreign Earned Income: $0
- Traditional IRA Deduction: $6,000
- Student Loan Interest Deduction: $1,500
Your estimated MAGI would be:
$60,000 (AGI) + $1,000 (Tax-Exempt Interest) + $0 (Foreign Income) + $6,000 (IRA Deduction) + $1,500 (Student Loan Interest) = $68,500
Disclaimer: This calculator provides an estimate of your Modified Adjusted Gross Income based on common add-backs. The exact definition of MAGI can vary depending on the specific tax credit or program you are evaluating. For precise calculations and personalized tax advice, always consult with a qualified tax professional or refer to IRS publications.