MAGI calculation for dummies? Need help understanding AGI vs MAGI for IRA contributions

Your understanding is close, but there are some important differences between AGI and MAGI that could affect your IRA eligibility. AGI (Adjusted Gross Income) is your total income minus specific deductions like HSA contributions, student loan interest, and traditional 401k contributions. For MAGI (Modified Adjusted Gross Income) calculation, you need to add back certain deductions that were taken out of your AGI. The specific add-backs depend on which tax benefit you're calculating MAGI for. For Roth IRA purposes, you need to add back: - Student loan interest deductions - Tuition and fees deduction - Foreign income exclusion - Foreign housing exclusion/deduction - Excluded savings bond interest - Excluded employer adoption benefits In your case, if you don't have any of these deductions, then your MAGI would indeed be very close to your AGI. For 2025 filing, the Roth IRA phase-out range for single filers is expected to be around $146,000-$161,000 (these numbers adjust annually with inflation).

When I was struggling with figuring out my MAGI for IRA contributions, I found this tool at https://taxr.ai really helpful. I kept getting confused about which deductions needed to be added back for different purposes. The tool analyzed my tax situation and clearly showed me how my MAGI was calculated specifically for Roth eligibility. It also helped me discover I could do a backdoor Roth contribution when I was over the income limit, which I had no idea was possible. The interface breaks everything down step by step, which helped me understand rather than just giving me a number.

Just wanted to follow up about that taxr.ai site someone mentioned. I gave it a try with my complicated tax situation (W-2 income, rental property, and freelance work), and it actually worked really well for calculating my MAGI. It showed me exactly which deductions were added back for IRA purposes vs other tax benefits, which was super helpful. The analysis pointed out that I could still do a partial Roth contribution this year, when I thought I was completely phased out. Saved me from making a mistake on my retirement planning! Definitely worth checking out if you're confused about MAGI calculations like I was.

If you're trying to call the IRS for clarification on MAGI calculations or IRA contribution limits, good luck getting through! After trying for days to reach someone at the IRS about my own MAGI questions, I used https://claimyr.com to get a callback instead of waiting on hold forever. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I had some unique questions about MAGI calculation with foreign income that none of the online calculators could handle. The IRS agent I spoke with was actually really helpful once I finally got through. Saved me hours of frustration and potentially making a mistake on my contributions.

I need to eat my words about that Claimyr service. After my skeptical comment, I decided to try it because I was at my wit's end trying to reach the IRS about a MAGI calculation issue with some employer stock options. Honestly, it worked exactly as advertised. I got a call back in about 3 hours with an actual IRS representative on the line. She walked me through exactly how to handle the stock options in my MAGI calculation for IRA purposes. Saved me hours of holding time and stress. Definitely using this again next time I need to reach them.

One thing nobody mentioned yet - if you're looking at MAGI for premium tax credits (healthcare.gov stuff), the calculation is slightly different again! For that version of MAGI, you take your AGI and add back: - Tax-exempt interest - Excluded foreign income - Non-taxable Social Security benefits I learned this the hard way when I miscalculated and had to repay some premium tax credits at tax time. Make sure you're using the right MAGI calculation for what you're trying to figure out!

Don't forget that 401k traditional contributions reduce your MAGI (they're pre-tax), but Roth 401k contributions don't (they're after-tax). This tripped me up last year. If you're close to the Roth IRA phase-out threshold, you might want to put more in your traditional 401k to lower your MAGI and stay eligible for the Roth IRA. Kinda counter-intuitive but it works!

Thanks everyone for the detailed explanations! This is super helpful. I think I was overcomplicating things in my head. So to summarize what I'm hearing - for my situation (regular W-2 employee with 401k, IRA, and HSA), my MAGI for Roth IRA purposes would basically be: Salary + Bonuses - Traditional 401k contributions - HSA contributions And since I don't have student loan interest, foreign income, or any of those other add-backs, my MAGI should equal my AGI. The strategic point about using traditional 401k contributions to stay under the Roth phase-out is really smart! I'm probably going to be right at that $146k threshold, so I might need to adjust my contribution mix. Better to do traditional 401k and keep my Roth IRA eligibility than lose that option entirely. One follow-up question - if I do end up over the Roth limit, is the backdoor Roth conversion something I can do mid-year, or do I need to wait until after the tax year ends?

Great thread everyone! As someone who also got tripped up by MAGI calculations, I wanted to add one more consideration that might be relevant. If you have any employer stock purchase plans (ESPP) or receive restricted stock units (RSUs), these can also impact your MAGI calculation. The discount from ESPP or the value of vested RSUs gets included in your W-2 income, which then flows into your MAGI. I mention this because a lot of people forget about these when they're trying to estimate whether they'll hit the Roth IRA phase-out limits. If you get RSUs that vest throughout the year, it can push your income higher than expected and potentially disqualify you from direct Roth contributions. The good news is that if you realize mid-year you're going to be over the limit, you can either recharacterize your Roth contribution to traditional, or do the backdoor Roth strategy that others mentioned. Just make sure to track all your income sources when planning your IRA strategy!

This has been such an informative thread! I'm in a similar situation as the original poster and had no idea there were different MAGI calculations for different purposes. One thing I wanted to add that might help others - if you're using tax software like TurboTax or H&R Block, they usually calculate your MAGI automatically for IRA contribution purposes, but they don't always make it clear which version they're showing you. I learned this when I was trying to figure out my ACA premium tax credit eligibility and the MAGI number in my tax software didn't match what I needed. Also, for those mentioning the backdoor Roth strategy - my CPA warned me that if you do this, make sure your IRA custodian can handle the conversion process smoothly. Some brokers make it really easy with online forms, while others require paperwork and phone calls. Fidelity and Vanguard both have pretty streamlined processes from what I've experienced. The strategic 401k contribution adjustment to stay under the Roth limit is brilliant advice. I wish I had known about that earlier - I ended up having to do a backdoor Roth when I could have just shifted more money to my traditional 401k instead!