Determining Your MAGI

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There are income limits for contributing to an IRA (traditional and Roth). These limits, along with your filing status and your Modified Adjusted Gross Income (MAGI) are important factors in setting the limits for Traditional IRAs, as there is the issue of deductibility at stake.

In order to fully understand the limitations, you also need to understand what makes up your Modified AGI (MAGI).  The MAGI is calculated as follows:

1. Start with your Adjusted Gross Income (line 11, Form 1040, Form 1040SR or Form 1040NR)
2. Add back in your IRA deduction amount (line 20 on Schedule 1)
3. Add back in your student loan interest (line 21 on Schedule 1)
4. Add back any foreign earned income and/or housing exclusions from line 45 of Form 2555
5. Add back any foreign housing deduction from line 50 of Form 2555
6. Add back any excluded qualified savings bond interest from Form 8815 line 14
7. Add back in any excluded employer-provided adoption benefits shown on line 28, Form 8839

The total of these seven items listed above make up your Modified Adjusted Gross Income, or MAGI.

The MAGI is used to determine the amount, if any, of your Traditional IRA contribution that is deductible if you or your spouse is covered by an employer retirement plan.

For a Roth IRA contribution, your MAGI is calculated as follows:

1. Start with your Adjusted Gross Income (line 11, Form 1040, Form 1040SR or Form 1040NR)
2. Subtract any income from the AGI that is the result of IRA funds to a Roth IRA, or from a rollover conversion from a qualified employer retirement plan to a Roth IRA
3. Add back in your IRA deduction amount (line 20 on Schedule 1)
4. Add back in your student loan interest (line 21 on Schedule 1)
5. Add back any foreign earned income and/or housing exclusions from line 45 of Form 2555
6. Add back any foreign housing deduction from line 50 of Form 2555
7. Add back any excluded qualified savings bond interest from Form 8815 line 14
8. Add back in any excluded employer-provided adoption benefits shown on line 28, Form 8839

Tallying up those 8 items will result in your MAGI for the purpose of a Roth IRA contribution.

For the current MAGI limits for each type of contribution, see IRS Publication 590A.

PS – Reader Paul correctly points out that there are other MAGI calculations (his example was for IRMAA) that are slightly different from the above MAGI calculations. Pay close attention to the requirements for the MAGI that you’re looking to calculate for your specific purposes.