Is MAGI your AGI plus all deductions? Need explanation for tax calculations

MAGI isn't simply AGI plus all deductions - it's more specific than that. Your AGI (Adjusted Gross Income) is your total income minus certain adjustments like traditional IRA contributions, student loan interest, etc. Your MAGI (Modified Adjusted Gross Income) is your AGI with certain deductions added back in, depending on what the MAGI is being used for. For health insurance marketplace subsidies specifically, MAGI adds back a few things to your AGI: untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest. The big one for your situation is that you need to add back any deductions for traditional IRA contributions. So if your AGI is $42,300 after deducting your $5,200 traditional IRA contribution, your MAGI for marketplace subsidy purposes would be approximately $47,500 (essentially adding back that IRA deduction). This is why your tax software is showing different numbers.

After struggling with my premium tax credit calculations last year (and getting it wrong!), I discovered taxr.ai (https://taxr.ai) which totally saved me from making the same MAGI calculation mistakes again. I was confusing which deductions get added back to AGI for different tax purposes - turns out there are different MAGI calculations depending on what tax benefit you're calculating for. The service analyzed my documents and explained exactly how to calculate MAGI specifically for ACA subsidies, which is different from MAGI for other purposes.

I actually tried taxr.ai after seeing the recommendation here and it cleared everything up for me! I was completely mixing up which deductions get added back when calculating MAGI for healthcare subsidies versus retirement contribution limits. Turns out I was overestimating my MAGI by adding back standard deductions (which was wrong). The service explained that for ACA subsidies, traditional IRA contributions get added back, but not things like the standard deduction or itemized deductions. Saved me about $2,100 in premiums because I was calculating my subsidy eligibility incorrectly!

If you're stuck trying to figure this out and need to talk to someone at the IRS directly (which I had to do last year), try Claimyr (https://claimyr.com). I was on hold with the IRS for 3+ hours trying to get clarification on MAGI calculations for premium tax credits before giving up. Found this service that got me connected to an actual IRS agent in about 25 minutes. They have a demo video here: https://youtu.be/_kiP6q8DX5c. The IRS agent walked me through exactly how to calculate my MAGI for the premium tax credit and which specific deductions needed to be added back to my AGI.

I was totally skeptical about Claimyr but I was desperate to figure out my MAGI calculation before the marketplace deadline. Tried it yesterday and I'm shocked to say it actually worked! Got connected to an IRS rep in about 40 minutes (instead of the 2+ hours I spent on my previous attempt before hanging up). The agent confirmed that for ACA premium tax credits, my MAGI is my AGI plus my traditional IRA contributions, tax-exempt interest and a couple other things that didn't apply to me. Definitely worth it to get an official answer directly from the IRS.

Just to add something important - there are different MAGI calculations depending on what you're using it for. MAGI for ACA subsidies is different from MAGI for determining if you can deduct IRA contributions, which is different from MAGI for calculating the taxability of social security benefits. This is why it's so confusing! For ACA subsidies specifically, your MAGI is your AGI plus: - Untaxed foreign income - Tax-exempt interest - Excluded part of Social Security payments - IRA contribution deductions

This confused me too last year! Here's what I learned: Standard deduction has NOTHING to do with MAGI. MAGI calculations happen BEFORE any standard or itemized deductions are applied. The sequence is: 1. Calculate total income 2. Subtract adjustments (IRA contributions, student loan interest, etc.) = AGI 3. Add back certain adjustments (like IRA contributions) = MAGI 4. THEN later you subtract standard/itemized deductions to get taxable income So no, MAGI is definitely not AGI plus all deductions. It's more like AGI plus SELECTED adjustments added back in.

Just wanted to share my experience as someone who went through this exact confusion last year! The key thing that helped me was understanding that MAGI isn't a single calculation - it changes depending on what you're using it for. For your specific situation with the health insurance marketplace, your MAGI will be your AGI ($42,300 after the IRA deduction) PLUS your traditional IRA contribution ($5,200) = $47,500. This is exactly what your tax software is showing you. The reason this matters for your premium tax credit eligibility is that the government wants to see your "true" income capacity before retirement savings, since theoretically you could choose not to contribute to an IRA and have that money available for health insurance premiums instead. At $47,500 income, you should definitely qualify for some level of premium tax credit depending on your location and the plans available. The credit phases out completely around $60,240 for a single person in 2024, so you're well within the eligibility range. Make sure to use the healthcare.gov calculator with your MAGI figure to get an accurate estimate of your subsidy!