Tax glossary

Modified Adjusted Gross Income (MAGI)

Modified Adjusted Gross Income — what it means, how it works, and a real example, explained without the jargon.

What is Modified Adjusted Gross Income (MAGI)?

MAGI is your AGI with certain deductions added back. It's the income figure that controls many phase-outs.

How it works

Different tax breaks add back different items — foreign income, student-loan interest, or IRA deductions, depending on the rule. MAGI, not plain AGI, is what decides Roth IRA eligibility, IRA deductibility, education credits, and ACA health-insurance subsidies.

A quick example

Your AGI is $145,000, but adding back a $2,500 student-loan-interest deduction lifts your MAGI to $147,500 — which can be exactly what tips you past a phase-out threshold.

What people get wrong

When a benefit says it phases out at a certain income, it almost always means MAGI. Check which add-backs apply before assuming your AGI keeps you under the line.

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Frequently asked questions

What does Modified Adjusted Gross Income mean?

MAGI is your AGI with certain deductions added back. It's the income figure that controls many phase-outs.

How does Modified Adjusted Gross Income work?

Different tax breaks add back different items — foreign income, student-loan interest, or IRA deductions, depending on the rule. MAGI, not plain AGI, is what decides Roth IRA eligibility, IRA deductibility, education credits, and ACA health-insurance subsidies.

What's the most common mistake with modified adjusted gross income?

When a benefit says it phases out at a certain income, it almost always means MAGI. Check which add-backs apply before assuming your AGI keeps you under the line.