IRS MAGI: What It Is and How It Affects Your Taxes

Modified Adjusted Gross Income (MAGI) is a financial figure the Internal Revenue Service (IRS) uses to determine eligibility for certain tax benefits. It is not a number found on your tax return; instead, it is derived from your Adjusted Gross Income (AGI). Understanding your MAGI can affect your ability to claim various deductions and credits, influencing your total tax liability.

The purpose of MAGI is to establish a consistent income measure for specific tax provisions. The calculation prevents certain deductions from lowering your income for the purpose of qualifying for tax breaks, creating a more level playing field for taxpayers.

Understanding AGI and MAGI

Adjusted Gross Income (AGI) is a figure on your federal income tax return, found on line 11 of Form 1040. It represents your gross income minus specific “above-the-line” deductions, such as contributions to a traditional Individual Retirement Arrangement (IRA), student loan interest, and educator expenses. AGI is calculated before you subtract either the standard deduction or itemized deductions.

Modified Adjusted Gross Income (MAGI) starts with your AGI and adds back some of those deductions. For determining eligibility for certain tax benefits, the government has decided that some deductions shouldn’t count toward lowering your income. For example, a student loan interest deduction lowers your AGI but is added back to calculate MAGI for many purposes.

Because deductions are added back, your MAGI will always be equal to or higher than your AGI. The specific deductions added back to AGI can vary depending on the tax benefit, meaning you might have a different MAGI for determining your IRA deduction eligibility than you do for an education credit.

How to Calculate Your MAGI

Calculating your MAGI begins with your Adjusted Gross Income (AGI) from line 11 of Form 1040. From this baseline, you add back specific deductions you took. MAGI is not a line item on your tax return; it is a separate calculation performed on IRS worksheets to determine eligibility for specific tax items.

Common items added back to AGI include the deduction for traditional IRA contributions, student loan interest, foreign earned income exclusion, and tax-exempt interest. The specific adjustments vary depending on the tax benefit you are trying to claim. For example, calculating MAGI for education credits requires adding back foreign earned income and housing exclusions, while the calculation for the Premium Tax Credit requires adding back tax-exempt interest and the non-taxable portion of Social Security benefits.

To illustrate, consider a single individual with an AGI of $70,000 who also deducted $2,500 in student loan interest. To calculate their MAGI for a Roth IRA contribution, they would add the $2,500 student loan interest deduction back to their AGI, resulting in a MAGI of $72,500 for this purpose.

MAGI Thresholds for Tax Credits and Deductions

Your MAGI impacts your eligibility for tax credits and deductions, many of which have income phase-out ranges. These thresholds determine if you can claim the full benefit, a reduced amount, or none. The income limits are adjusted for inflation and vary by filing status.

Roth IRA Contributions

Contributing to a Roth IRA is subject to MAGI limits. For 2025, a single filer can make a full contribution if their MAGI is less than $150,000, with the benefit phasing out between $150,000 and $165,000. For married couples filing jointly, the full contribution is allowed for a MAGI under $236,000, with a phase-out range between $236,000 and $246,000.

Traditional IRA Deductions

The ability to deduct contributions to a Traditional IRA is limited by MAGI if you or your spouse are covered by a retirement plan at work. For 2025, the deduction for single filers covered by a workplace plan phases out with a MAGI between $79,000 and $89,000. For married couples filing jointly where the contributing spouse has a plan, the phase-out range is $126,000 to $146,000. If only your spouse is covered by a workplace plan, the phase-out range for your deduction is between $236,000 and $246,000.

Education Credits

The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) have MAGI limitations. In 2025, the full credit requires a MAGI of $80,000 or less for single filers, or $160,000 or less for married joint filers. A reduced credit is available for single filers with a MAGI between $80,000 and $90,000 and for joint filers with a MAGI between $160,000 and $180,000.

Child Tax Credit

The Child Tax Credit is also governed by MAGI thresholds. For 2025, the credit is worth up to $2,000 per qualifying child and begins to phase out for taxpayers with a MAGI above $200,000 for single filers or $400,000 for married couples filing jointly. The credit is reduced by $50 for each $1,000 that your MAGI exceeds these thresholds.

MAGI’s Use Beyond Standard Tax Filings

Modified Adjusted Gross Income also determines eligibility for healthcare-related programs. Your MAGI is used to qualify for subsidies under the Affordable Care Act (ACA) and to set monthly premiums for Medicare, directly impacting your annual healthcare costs.

Affordable Care Act (ACA)

Under the Affordable Care Act, MAGI determines eligibility for the Premium Tax Credit, a subsidy that lowers the cost of health insurance from the Health Insurance Marketplace. Through the 2025 coverage year, eligibility is based on whether the benchmark plan premium costs more than 8.5% of your household income. Individuals and families with incomes at or above 100% of the federal poverty level may qualify.

The MAGI calculation for the ACA is specific, adding back non-taxable income like tax-exempt interest, excluded foreign income, and the non-taxable portion of Social Security benefits to your AGI. The amount of your tax credit is tied to your MAGI, with larger credits available to those with lower incomes.

Medicare Premiums

Your MAGI affects how much you pay for Medicare Part B (medical insurance) and Part D (prescription drug coverage). The Social Security Administration uses your MAGI from two years prior to determine if you must pay an Income-Related Monthly Adjustment Amount (IRMAA). This is an extra amount higher-income beneficiaries pay on top of standard premiums.

For 2025, IRMAA surcharges are based on your 2023 tax return. Individuals with a 2023 MAGI above $106,000 and married couples with a MAGI above $212,000 will pay higher premiums for Part B and Part D. The surcharge increases as income rises through a series of brackets.