What Is the Difference Between AGI and MAGI on Your Taxes?

AGI calculation

Your adjusted gross income is all of the income you bring in, less certain adjustments. You can find the allowable reductions to your income on the front page of your Form 1040. Commonly used adjustments include the following:

• IRA and self-employed retirement plan contributions
• Alimony payments  (for divorce agreements prior to 2019)
• Self-employed health insurance payments
• One-half of any self-employment taxes paid

Other adjustments used in calculating AGI include the following:

• Health savings account deductions
• Penalties on the early withdrawal of savings
• Educator expenses
• Student loan interest
• Moving expenses (for tax years prior to 2018)
• Tuition and fees
• Deductions for domestic production activities (for tax years prior to 2018)
• Certain business expenses of performing artists, reservists, and fee-basis government officials

AGI effects on your taxes

The amount of your AGI affects how you can use numerous credits and exemptions. Your AGI affects the amount you can claim for the dependent care credit, credits for the elderly or permanently disabled, the adoption credit, the child tax credit, the Hope & Lifetime Learning credits, and the earned income credit. Many deductions phase out or disappear altogether if you have an AGI above certain limits. Deductions affected by your AGI include the following:

• Total itemized deductions
• Miscellaneous itemized deductions (for tax years prior to 2018)
• Mortgage insurance premiums
• Qualified motor vehicle taxes
• Charitable contributions
• Medical deduction allowance

MAGI calculation

To calculate your modified adjusted gross income, take your AGI and add back certain deductions. Many of these deductions are rare, so it's possible your AGI and MAGI can be identical. According to the IRS, your MAGI is your AGI with the addition of the following deductions, if applicable:

• Student loan interest
• One-half of self-employment tax
• Qualified tuition expenses
• Tuition and fees deduction
• Passive loss or passive income
• IRA contributions, taxable social security payments
• The exclusion for income from U.S. savings bonds
• The exclusion under 137 for adoption expenses
• Rental losses
• Any overall loss from a publicly traded partnership

MAGI effects on your taxes

Your MAGI is used as a basis for determining whether you qualify for certain tax deductions. One of the most notable is in determining whether or not your contributions to an individual retirement plan are deductible.

For example, as of 2018, if you were a single filer and covered by a retirement plan at work, you couldn't take an IRA deduction if you had an MAGI of $73,000 or higher. You also couldn't take a deduction for student loan interest if you had a MAGI of $80,000 or higher as a single, or $165,000 if married and filing jointly.