What is Modified Adjusted Gross Income (MAGI)?

Just a brief tax-related question from a reader today:

“I always read that whether you qualify for this or that tax break depends on your Modified Adjusted Gross Income. But I do not see that number on my tax return. I see “adjusted gross income.,” but not “modified adjusted gross income.”

Your modified adjusted gross income (MAGI) doesn’t appear as a line on your tax return because, in a given year, you could have multiple different modified adjusted gross incomes. The reason is that your MAGI for the purpose of calculating one deduction or credit is often different from your MAGI when calculating a different deduction or credit.

In each case, you start with adjusted gross income (which you can find at the bottom of the first page of your Form 1040), then you modify it in certain ways. But the specific modifications to be made depend on which tax break we’re talking about.

For example, (unless you’re a resident of Guam, Puerto Rico, or American Samoa) when determining whether or not you can claim the American Opportunity Credit for higher education expenses, your modified adjusted gross income is your adjusted gross income, after adding back any amounts you subtracted for:

• the foreign earned income exclusion,
• the foreign housing exclusion, and
• the foreign housing deduction.

But when calculating your modified adjusted gross income for the purpose of determining whether or not you can contribute to a Roth IRA, you make the same modifications as above, and you add back any amounts you subtracted for:

• traditional IRA deductions,
• the student loan interest deduction,
• the tuition and fees deduction (this expired at the end of 2011, but it could be relevant if you’re dealing with an older return),
• the adoption assistance program exclusion, and
• the domestic production activities deduction.

In short, it’s never a good idea to assume that you know what is included in modified adjusted gross income in one particular context simply because you’ve seen how the calculation was performed in another context.