IRA Roth IRA Taxes

What is Modified Adjusted Gross Income (MAGI)?

What is Gross Income (GI?)

Gross Income is your total income from salary (wages), interest earned, and dividends. It also includes alimony, capital gains, business income, royalty income, rental income, unemployment income, retirement distributions, and other income

What is Adjusted Gross Income (AGI)?

It is Gross Income (GI) minus certain payments you’ve made during the year, such as student loan interest, contributions to a traditional individual retirement account (IRA), 401K, or a health savings account (HSA).

This AGI is starting point of calculating your total tax due to the IRS.

Note that AGI doesn’t include itemized or standard deductions, exemptions, and credits.

What is Modified Adjusted Gross Income (MAGI)?

For most people MAGI is same as AGI.

MAGI is AGI plus any tax-exempt interest income you may have plus any social security benefits. This tax-exempt interest you might have earned or accrued in your account.

MAGI is used by the IRS to determine if you are eligible to use certain deductions, credits (including premium tax credits), or retirement plans contribution limits such as ROTH or traditional IRA.


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