Most taxpayers are familiar with the term “adjusted gross income” (AGI). This is your total taxable income after adjustments have been made for the types of deductions you can take without itemizing (including student loan interest, moving costs, alimony payments, and others). Your AGI then impacts various other tax credits and deductions. For example, the amount of your AGI affects how much you can claim for the dependent care credit, how much you can deduct for gifts to charitable organizations, and more.
Your “modified adjusted gross income” (MAGI) is used to determine whether you are eligible to claim certain tax deductions, notably whether you can deduct contributions to your retirement plan. To calculate your MAGI, you start with your AGI and then add certain deductions back in. These include:
- Student loan interest
- Qualified education expenses
- Self-employment tax (only the half you deducted)
- IRA contributions
- Any taxable social security payments
- Passive loss/passive income
- Rental losses
- And several others
Then the MAGI should be checked against the threshold for relevant tax deductions, such as the aforementioned deduction for retirement contributions.
Want help calculating your MAGI? Need to refile a past tax return to correct deductions that were over the threshold dictated by your MAGI? No matter what type of tax help you require, Taxation Solutions, Inc. is standing by to serve you. Call now to learn more!