Modified Adjusted Gross Income (MAGI) is used to determine eligibility for numerous tax benefits, including the Child Tax Credit, education credits and certain deductions. It begins with Adjusted Gross Income (AGI) (your gross income minus adjustments such as traditional IRA contributions, student loan interest, and alimony paid). To compute MAGI, you add back certain items that were excluded or deducted in arriving at AGI, such as:
- Tax‑exempt interest (e.g., municipal bond interest).
- Excluded foreign earned income (plus housing exclusion).
- Deductions for traditional IRA contributions or student loan interest (for some credits).
- Deductions for qualified tuition and fees (if applicable).
The definition of MAGI varies slightly depending on the tax benefit involved; for example, the AOTC and LLC phase‑outs use AGI plus tax‑exempt interest. For some purposes (e.g., Roth IRA eligibility), you also add back excluded Social Security and certain other adjustments. Always check the specific credit’s instructions for the MAGI calculation.
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