MAGI — the number behind every tax phase-out

Most US taxpayers who look at their Form 1040 see one income figure that matters: adjusted gross income on line 11. In practice, the tax code references a second figure far more often than it references AGI directly — modified adjusted gross income, almost always abbreviated MAGI. The two numbers are related but not identical. AGI is a single, mechanically computed figure that comes from subtracting Schedule 1 Part II adjustments from total income. MAGI starts from that same AGI and then adds back certain deductions or exclusions, producing a second number that is equal to or higher than AGI. The items added back are different for each tax provision that uses MAGI, which means there is not one MAGI but several, each defined in its own section of the Internal Revenue Code.

The short answer, if you came here looking for MAGI on your return: it is not there. MAGI has no line on Form 1040, no box on a W-2, and no entry on any transcript. You will not find it because it is not reported — it is computed, separately, each time a provision calls for it. You start from AGI on line 11 and add back specific items, and the items to add back are different for each provision. For a large share of filers — no foreign earned income exclusion, no tax-exempt interest, no excluded savings bond interest — the add-backs come to zero and MAGI simply equals the line 11 figure. That is why so many people conclude MAGI and AGI are the same number: for their return, they are.

The moment one of those exclusions appears, or the provision in question uses a wider definition, the two separate. There is no single MAGI to look up, so the useful question is never “what is my MAGI” but “what is my MAGI for this specific provision” — and the sections below work through each of the common ones in turn.

This distinction is not academic. Whether a household can contribute to a Roth IRA, receive the Premium Tax Credit, claim education credits, deduct student loan interest, avoid the Net Investment Income Tax surcharge, or escape Medicare IRMAA surcharges — all of these depend on the household’s MAGI for that specific provision, not on AGI, and not on taxable income. A single planning move — say, a Roth conversion or the sale of a rental property — can raise some MAGIs and leave others untouched, depending on whether the income type in question is included in each provision’s add-back formula. Understanding which MAGI gates which provision is the foundational skill of tax-planning coordination.

This guide walks through how MAGI is constructed, the major provisions that use their own MAGI definitions, the specific add-backs that distinguish each one, the thresholds and phase-out mechanics for the provisions most households encounter, and the planning levers that move MAGI in the desired direction. Every threshold cited is for tax year 2026 unless noted, sourced to IRS publications listed at the end. The AGI line-by-line guide covers how AGI itself is computed on Form 1040; this guide picks up from that point.

The structural relationship between AGI and MAGI

Adjusted gross income is computed once per return. It lives on Form 1040 line 11 and does not change after the return is filed. MAGI, by contrast, is computed on a provision-by-provision basis — each section of the Internal Revenue Code that uses the term “modified adjusted gross income” defines its own set of items to add back to AGI. The IRS does not print a single “MAGI” line on Form 1040, because the figure depends on which provision is being tested.

The general formula is:

MAGI = AGI + provision-specific add-backs

For most W-2 workers with no foreign income, no tax-exempt bond interest, and no excluded income of any kind, every add-back is zero — which means every MAGI equals AGI exactly. The distinction matters only when the taxpayer has one or more of the income types or deductions that a particular provision adds back. The most common add-backs across the various MAGI definitions are:

• Foreign earned income excluded under IRC §911
• Tax-exempt interest income (municipal bond interest)
• The student loan interest deduction (IRC §221)
• The tuition and fees deduction (expired after 2020, but its add-back language persists in some provisions)
• Employer-provided adoption benefits excluded under IRC §137
• The deductible portion of self-employment tax (added back only in the Premium Tax Credit MAGI)
• Excluded Series EE and I bond interest used for education expenses

Because different provisions add back different items from this list, two provisions can produce different MAGIs from the same AGI. The Roth IRA MAGI for a municipal-bond-holding household will be higher than that household’s AGI, while the same household’s student loan interest deduction MAGI may be lower if the student loan interest add-back is smaller than the municipal bond interest add-back. There is no shortcut that works for all provisions — each one must be checked against its own statutory language.

Roth IRA contribution MAGI — the most commonly referenced

The MAGI most individual taxpayers encounter first is the one that determines eligibility to contribute directly to a Roth IRA, defined in IRC §408A and the corresponding IRS Publication 590-A worksheet. The Roth IRA MAGI starts from AGI and adds back:

• Any traditional IRA deduction claimed on Schedule 1 line 20
• Student loan interest deduction from Schedule 1 line 21
• Tuition and fees deduction (no longer available after 2020, but the worksheet line persists)
• Foreign earned income exclusion from Form 2555
• Foreign housing exclusion or deduction from Form 2555
• Excluded Series EE/I bond interest from Form 8815
• Excluded employer adoption benefits from Form 8839

For 2026, the Roth IRA contribution phase-out begins at $153,000 of Roth IRA MAGI for single filers and $242,000 for married filing jointly (Notice 2025-67). Above $168,000 single or $252,000 MFJ, direct Roth contributions are fully prohibited. The phase-out is linear: if a single filer’s Roth MAGI is $160,500 — exactly halfway through the $153,000–$168,000 window — the allowable contribution is reduced by 50% of the $7,500 full limit, to $3,750. Note the asymmetry that catches couples out: the single range is $15,000 wide and the joint range only $10,000, so a joint filer crosses from full contribution to none over a shorter stretch of income.

Filers above the upper threshold who still want Roth exposure use the backdoor Roth IRA conversion strategy: contribute to a nondeductible traditional IRA (no MAGI limit on nondeductible contributions), then convert to Roth. The conversion itself is included in AGI as ordinary income, but because the contribution was after-tax, only the earnings portion is taxable — and if the conversion happens quickly, earnings are typically near zero. The backdoor strategy works regardless of MAGI because the contribution step has no income limit and the conversion step has no income limit; only the direct Roth contribution has a MAGI gate.

Premium Tax Credit MAGI — the ACA marketplace threshold

The Premium Tax Credit, which subsidizes health insurance purchased through an Affordable Care Act marketplace, uses a MAGI definition from IRC §36B(d)(2) that is broader than the Roth IRA version. Premium Tax Credit MAGI equals AGI plus:

• Tax-exempt interest income
• Foreign earned income excluded under §911
• The non-taxable portion of Social Security benefits

The Social Security add-back is the key difference. A retired household receiving $30,000 of Social Security benefits, of which $25,500 is tax-exempt under the Social Security taxation formula, would add back that $25,500 to AGI when computing Premium Tax Credit MAGI — even though it was not included in AGI. This produces a substantially higher MAGI than the Roth IRA calculation would for the same household, and it can push early retirees above the Premium Tax Credit cliff if they are not managing their income sources carefully.

The Premium Tax Credit is available to households with MAGI between 100% and 400% of the federal poverty level for marketplace plans purchased outside of employer coverage. Below 100% of the poverty level, the household is typically eligible for Medicaid instead (in states that expanded Medicaid). Above 400%, there is no credit at all. The enhanced subsidies enacted by the American Rescue Plan Act and extended by the Inflation Reduction Act expired on December 31, 2025, and Congress did not renew them, so for 2026 coverage the 400% cliff is back in force. The cliff effect at the upper threshold can produce marginal effective tax rates above 100% for a single additional dollar of income, which is why MAGI management in early retirement years is one of the highest-leverage planning exercises in the tax code.

Net Investment Income Tax MAGI — the 3.8% surtax trigger

The Net Investment Income Tax, enacted under IRC §1411 as part of the Affordable Care Act, imposes a 3.8% surtax on the lesser of net investment income or the excess of MAGI over statutory thresholds: $200,000 for single and head of household, $250,000 for married filing jointly, $125,000 for married filing separately. These thresholds have never been adjusted for inflation since 2013, which means an increasing number of households become subject to the NIIT each year as nominal wages and investment returns drift upward.

The NIIT MAGI starts from AGI and adds back only one item: foreign earned income excluded under §911. Unlike the Premium Tax Credit MAGI, the NIIT MAGI does not add back tax-exempt interest or Social Security benefits. Unlike the Roth IRA MAGI, it does not add back student loan interest or IRA deductions. The NIIT MAGI is therefore one of the narrowest definitions in the code — for most domestic-only filers, it equals AGI exactly.

The interaction between the NIIT and the capital gains tax brackets is where planning complexity concentrates. A household with $240,000 of W-2 income and $30,000 of long-term capital gains has $270,000 of AGI (and NIIT MAGI). The NIIT applies to the lesser of $30,000 (investment income) or $20,000 ($270,000 minus the $250,000 MFJ threshold) — so $20,000 of the gain faces the additional 3.8%, producing an effective rate of 18.8% on that portion (15% LTCG + 3.8% NIIT) while the first $10,000 of gain pays only 15%. Tax-loss harvesting that reduces net investment income also reduces the NIIT base dollar-for-dollar, which is why realized losses have a dual benefit for NIIT-exposed households.

Medicare IRMAA MAGI — the two-year-lagged cliff

Medicare Part B and Part D premiums are income-adjusted through the Income-Related Monthly Adjustment Amount (IRMAA), which uses a MAGI definition from the Social Security Act §1839 rather than the Internal Revenue Code. IRMAA MAGI equals AGI plus tax-exempt interest income — a two-item formula that is simpler than most other MAGIs but catches municipal-bond investors who assumed their tax-exempt income was invisible to the federal government.

The critical operational detail is the two-year lookback. IRMAA surcharges for 2026 are based on the MAGI reported on the 2024 tax return. A retiree who did a large Roth conversion in 2024 will face higher Medicare premiums in 2026, even if their 2026 income is much lower. The surcharges are assessed in tiers: for 2026, the first IRMAA tier for single filers begins at $109,000 of MAGI ($218,000 MFJ), and the highest tier applies at $500,000 and above single ($750,000 MFJ). The surcharge at the first tier above the $202.90 base premium is $81.20/month per person for Part B, and additional tiers escalate sharply.

The two-year lag creates a planning window: a retiree who knows their 2024 MAGI was elevated (from a Roth conversion, a property sale, or a pension lump-sum) can file SSA-44 (Medicare Income-Related Monthly Adjustment Amount — Life-Changing Event) if they experienced a qualifying life change (retirement, divorce, death of a spouse, work reduction, loss of pension) that makes the 2024 income unrepresentative. The SSA-44 form allows the Social Security Administration to use a more recent year’s income instead of the two-year-lagged figure. Absent a qualifying life event, the surcharge stands for the full calendar year.

Education credit MAGI — American Opportunity and Lifetime Learning

The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) each use a MAGI that adds back foreign earned income and foreign housing exclusions to AGI. For 2026 (these thresholds are fixed by statute, not indexed), the AOTC begins phasing out at $80,000 of MAGI for single filers ($160,000 MFJ) and is fully phased out at $90,000 single ($180,000 MFJ). The LLC phase-out is higher: $80,000 single and $160,000 MFJ at the lower bound, $90,000 and $180,000 at the upper. Both credits provide a dollar-for-dollar reduction in tax liability (with the AOTC being partially refundable at 40% of the first $1,000), which makes the effective marginal rate inside the phase-out window quite high.

For households near the phase-out boundary, the most common planning lever is timing. Qualified education expenses paid in December versus January of the following year shift the credit to a different tax year. If the household’s MAGI fluctuates between years — common for self-employed filers, filers with variable bonuses, or filers in a year of Roth conversion — placing the education expenses in the lower-MAGI year preserves the credit that would otherwise phase out.

Student loan interest deduction MAGI

The student loan interest deduction allows up to $2,500 of qualified student loan interest to be deducted above the line on Schedule 1 line 21, reducing AGI. The MAGI used to test eligibility for the deduction is AGI computed without the student loan interest deduction itself — in other words, the deduction is added back to AGI to determine whether the filer qualifies for the deduction. This circular construction is resolved by the IRS worksheet, which computes MAGI before applying the deduction.

For 2026, the deduction begins phasing out at $85,000 of MAGI for single filers ($175,000 MFJ) and is fully phased out at $100,000 single ($205,000 MFJ), per Rev. Proc. 2025-32. The deduction interacts with income-driven repayment plans in a structurally important way: borrowers on IDR who file married filing separately to keep their IDR payment based on individual income lose the student loan interest deduction entirely (MFS filers are not eligible). The combined effect of higher IDR payments on joint income versus losing the student loan interest deduction on MFS is a case-by-case analysis with no universal answer — the IRS worksheet and the IDR payment calculator must both be run under each filing status to compare total cost.

Planning levers that reduce MAGI

Because MAGI starts from AGI, every above-the-line deduction that reduces AGI also reduces MAGI (unless that specific deduction is added back for the provision in question). The most common planning levers for W-2 employees are:

Pre-tax retirement contributions. Traditional 401(k), 403(b), and 457(b) contributions reduce W-2 box 1 wages before they reach Form 1040 line 1a, which reduces AGI and therefore all MAGIs. The 2026 elective deferral limit is $24,500 ($32,500 with the age-50 catch-up), per Notice 2025-67. For households near a MAGI cliff — the Roth IRA phase-out, the NIIT threshold, or an IRMAA tier — maxing out pre-tax retirement contributions is the first structural lever.

HSA contributions. Health savings account contributions for filers enrolled in a qualifying high-deductible health plan are deductible above the line on Schedule 1 line 13, reducing AGI and all MAGIs. The 2026 HSA contribution limit is $4,400 for self-only coverage ($8,750 for family), per Rev. Proc. 2025-19. The HSA is the only account in the US tax code that is deductible going in, tax-free while invested, and tax-free coming out for qualified medical expenses — the triple tax advantage makes it structurally the most efficient savings vehicle for households that can use it.

Timing of income recognition. Capital gains are realized in the year the asset is sold. A household approaching a MAGI cliff can defer the sale to the following year, spreading MAGI across two tax years and potentially keeping both years below the threshold. Similarly, Roth conversions can be sized to fill the gap between current AGI and the next MAGI threshold, converting exactly enough to stay below the cliff rather than converting a round number.

Charitable giving from traditional IRA (QCD). Filers aged 70½ or older can make qualified charitable distributions directly from a traditional IRA to a qualified charity, up to $108,000 per year in 2025 (rising to $111,000 in 2026). The QCD satisfies the required minimum distribution but is excluded from AGI entirely — it never reaches line 4b of Form 1040. For retirees managing IRMAA and Premium Tax Credit MAGI, the QCD is one of the most powerful levers because it removes dollars that would otherwise appear in AGI, while simultaneously satisfying the RMD that would have raised AGI if taken as a normal distribution.

Harvesting capital losses. Realized capital losses offset capital gains dollar-for-dollar, and up to $3,000 of net losses can offset ordinary income per year. Because losses reduce AGI, they reduce all MAGIs. The wash sale rule prevents repurchasing a substantially identical security within 30 days, but tax-loss harvesting into a similar (not identical) fund preserves market exposure while banking the loss for MAGI management.

The cliff versus the phase-out — why the distinction matters

Some MAGI-tested provisions phase out gradually: the Roth IRA contribution is reduced proportionally across a $15,000 (single) or $10,000 (MFJ) window, so each additional dollar of MAGI reduces the allowable contribution by a predictable fraction. Other provisions operate as cliffs: IRMAA tiers jump from one premium level to the next with a single dollar of MAGI crossing the threshold, producing a marginal cost that far exceeds the income that triggered it.

The Premium Tax Credit has historically been the sharpest cliff. Under the ACA’s original design, a household at 399% of the federal poverty level received a full subsidy, while a household at 401% received nothing — a single dollar of additional income could cost several thousand dollars in lost premium assistance. The American Rescue Plan Act of 2021 softened this cliff by capping marketplace premiums at 8.5% of household income for all income levels, but that enhancement lapsed at the end of 2025 and the cliff returned for 2026 coverage.

The practical consequence for planning: phase-out provisions reward precision (fill the window exactly), while cliff provisions reward staying below the line with a safety margin. A household managing Roth IRA MAGI can tolerate being inside the phase-out and accept a smaller contribution. A household managing IRMAA MAGI should aim to stay below the tier threshold by a meaningful margin, because the cost of crossing by $1 is the full surcharge for the entire calendar year.

Common errors in MAGI management

Using one MAGI for all provisions. The single most common planning error is computing MAGI once and applying it everywhere. A financial planner who says “your MAGI is $180,000” without specifying which MAGI is providing incomplete information — the Roth IRA MAGI, the NIIT MAGI, the IRMAA MAGI, and the Premium Tax Credit MAGI may all be different numbers for the same household. Each provision must be tested against its own MAGI.

Ignoring the IRMAA two-year lag. A retiree who did a large Roth conversion in 2024 and forgot about the two-year lookback will face an unexpected Medicare surcharge in 2026. The surcharge is assessed automatically by the Social Security Administration based on IRS data, and by the time the premium notice arrives, the tax year that caused it is closed. The planning window is before the conversion, not after.

Forgetting that Roth conversions raise MAGI. Converting $100,000 from a traditional IRA to a Roth IRA adds $100,000 to AGI and therefore to every MAGI. A household that converts enough to push MAGI above the NIIT threshold pays 3.8% on investment income that was previously below the line. A household that converts enough to push IRMAA MAGI above the next tier pays 12 months of elevated Medicare premiums. Conversion planning must model the downstream MAGI effects, not just the income tax on the conversion itself.

Conflating MAGI with taxable income. MAGI is always equal to or higher than AGI, which is always higher than taxable income (because taxable income subtracts the standard or itemized deduction). A filer whose taxable income is $140,000 may have an AGI of $155,000 and a Roth IRA MAGI of $158,000 if the traditional IRA deduction and student loan interest are added back. The phase-out tests against MAGI, not against the lower taxable income figure.

Sources

• IRS Publication 590-A — Roth IRA contribution MAGI worksheet and phase-out thresholds. irs.gov/pub/irs-pdf/p590a.pdf
• IRS Publication 596 — Earned Income Credit MAGI definition. irs.gov/pub/irs-pdf/p596.pdf
• IRC §408A — Roth IRA, including the MAGI-based contribution phase-out. uscode.house.gov
• IRC §1411 — Net Investment Income Tax and its MAGI definition. uscode.house.gov
• IRC §36B — Premium Tax Credit MAGI definition. uscode.house.gov
• Social Security Act §1839 — Medicare Part B premiums and IRMAA tiers. ssa.gov/OP_Home/ssact/title18/1839.htm
• CMS — Medicare Part B premium rates and income-related adjustments for 2026, Federal Register, November 19, 2025. federalregister.gov/documents/2025/11/19/2025-20251
• IRS Revenue Procedure 2025-32 — 2026 inflation-adjusted amounts, including the student loan interest phase-out. irs.gov/pub/irs-drop/rp-25-32.pdf
• IRS Notice 2025-67 — 2026 retirement plan limits and Roth IRA phase-outs. irs.gov/pub/irs-drop/n-25-67.pdf
• IRS Revenue Procedure 2025-19 — 2026 HSA limits. irs.gov/pub/irs-drop/rp-25-19.pdf
• KFF — What we know so far about 2026 ACA Marketplace enrollment, premiums, and deductibles (expiration of the enhanced premium tax credits). kff.org