A Modified Adjusted Gross Income (MAGI) Calculator helps you assess your eligibility for tax breaks, tax credits, or other government-subsidized programs. MAGI represents your gross income with the addition of excluded income and certain deductions. If you keep reading this article, you will learn more about MAGI and how to calculate it using our calculator. You can also learn how IRS affects calculating MAGI.

Our calculator focuses on identifying certain tax credits in order to make it easier to understand how to increase credits and deductions. Check other CalCon calculators that will give you answers on how to calculate gross profit or how you can calculate gross salaries?

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What is gross income?

A particular individual’s total realized income on salary before paying taxes or other deductions on salary represents gross income. The residual value after-tax is called net income and always has a lower value than gross income. Sources of gross income for which tax is required are business income, dividends, sales of goods on online platforms, interest from bank accounts, etc.

The value of gross income comes from salaries, which may include the amounts of annuities, alimony, retirement, rental income, or other types of capital gains. The gross income of a specific company means the value of the difference between the total realized income and the cost of sold products or services.

Modified adjusted gross income MAGI – Definition

Depending on the state or tax benefits for which you are applying, the types of assessment of earned earnings are also different. It could help to determine whether you meet the necessary conditions based on the performed evaluation. Therefore, the modified adjusted gross income – MAGI, represents the modification or adjustment of the realized AGI (adjusted gross income). You can do this modification by adding specific cost values. In addition, the modification considers using several allowable deductions including tax penalties. With the help of this measure, you can reduce the amount of tax benefits. Understanding MAGI allows you to find out if you are competent to deduct interest on a student loan or child tax credit. In order to calculate MAGI, you can modify AGI by using certain tax deductions and credits.

Furthermore, with the MAGI you can determine whether you can use specific government health or retirement insurance subsidies. You can also use the MAGI value to assess whether you are a good candidate for particular interest requirements. To claim the full amount of credit, you need to modify your MAGI. The modified adjusted gross income does not include additional income security and does not appear as a tax return item at the end of the year.

MAGI and AGI: Difference?

The amount of gross income considers the entire salary of the year, including dividends, interest income, retirement, and the like. As such, AGI is more beneficial for tax regulation purposes. When calculating the AGI, it is necessary to include half taxes related to self-employment. The importance of the AGI calculation is crucial as it represents the total income before including standard deductions or credits. If you make the deductions from the amount of gross income, you can reduce the amount that you need to tax further when calculating the AGI.

While in the MAGI calculation, you can use only some deductions when increasing revenue. In most cases, the value of MAGI and AGI may be the same or similar. You can use these calculation methods to reduce your tax liability at the end of the accounting period.

How do I calculate modified adjusted gross income (MAGI)?

The process of calculating the value of your MAGI is straightforward, and it is enough to follow the following steps:

  1. calculate annual gross income
  2. calculate the value of AGI
  3. add certain allowable deductions

The first step involves calculating the number of total earnings during the year (dividends, rental income, retirement, operating income).

The next step is to understand the calculation of AGI. It is an item that further affects the possibility of using certain tax benefits. The value of the AGI is equal to the gross income you deduct by tax-deductible expenses. These include educator costs, amount of health insurance premium, health savings account contributions, amount of student loan interest, etc. You can also perform the AGI calculation procedure using Form 1040, which contains all the instructions.

In the third step, you finalize the entire process of adding back certain deductions that were subsequently granted to you. This may include all deductions for IRA contributions, tuition or other fees, the amount of excluded income from abroad, etc. We distinguish several commonly used tax benefits such as traditional IRA deduction, premium and child tax credit, or net investment income tax.

The importance of modified adjusted gross income

Many situations reflect the importance of calculating modified adjusted gross income – MAGI. With the help of this calculation, you can determine whether you are eligible for tax benefits in the health sector, for children, education, or lifelong learning.

While you know a MAGI value, you can find out if you can deduct your IRA (individual retirement account) contributions and how much you contribute to the Roth IRA. With the MAGI, you can find out if you can deduct the amount of IRA contributions for you and your spouse if you have a retirement plan. When it comes to owning a retirement plan, there are specific limitations for the possible contributions. If neither spouse is affected by the business plan, then you have the option of a full deduction that goes up to the tax limit of the possible contribution. Then it is the so-called traditional IRA. To contribute the value of a traditional IRA, you can reduce the amount of taxable income for the tax year of the business.

In order to better calculate the MAGI, you can contact a tax expert. It is important to follow tax laws that are changeable and in many cases complicated to enforce. The most well-known tax law enforcement agencies (IRS) use the values of MAGI to determine the fulfillment of all conditions for the approval of certain tax benefits for a company or individual. You can calculate your MAGI by adjusting the AGI, in addition to the deductions set by the IRS which are in line with your business. The lower the calculation value, the better the chances of granting certain tax breaks. If the amount of MAGI exceeds the allowable tax limit set by the IRS, then you are not able to refuse certain contributions when you send your tax return.

Modified adjusted gross income calculator – How to Use?

It is necessary to give more detailed instructions for using our calculator. The calculator contains fields with required values for calculating MAGI to facilitate the calculation process. You fill in the blanks depending on which tax credits you have been granted. Entering values, the calculator displays the total amount of MAGI.

Modified adjusted gross income calculator – Example

To know if you are a suitable candidate for a health insurance loan, you need to calculate the value of the MAGI. 

First, you need to enter the value of the AGI. For example, $150,000. After that, let’s say that the income abroad is $35,000, and the cost of living is $5,000. After that, the final result and the value of MAGI for this case is $180,000.

If you need other customizations, some of the possible ones are available if you select the advanced option. The procedure for entering values for some other cases is identical.

The value of the calculated MAGI may vary according to certain tax benefits. To sum up, MAGI is an important tax concept that you need to understand.


How to calculate my modified adjusted gross income (MAGI)?

It is necessary to collect value from all sources needed for gross income to the end of the year. Then subtract all “adjustments” from the amount obtained to get the AGI value. Add deductions to the obtained AGI for which you have met the conditions.

Is MAGI the same as adjusted gross income (AGI)?

AGI is required to calculate the modified adjusted gross income value, and therefore these calculations are closely related. 

Is IRMAA based on AGI or MAGI?

The reason for deciding the existence of an IRMAA depends on the SSA using certain tax limits by the IRS. You can use the value of the modified adjusted gross income (MAGI) to determine the monthly amount of IRMAA. 

How to lower modified adjusted gross income?

It could help you reduce the amount of MAGI with a pension plan, health insurance premiums (if you are self-employed), earning less money, etc.

What is the modified adjusted gross income on 1040?

The MAGI does not appear as an item of tax return, but you can find the AGI value on form 1040 that you further modify for specific items to get the MAGI value. You need to fill in this form at the end of every year.