Which deductions reduce AGI or MAGI? FSA contributions, 401(k) contributions, health insurance premiums - need clarity!

Yes, this can definitely be confusing! Let me break it down for you: 401(k) contributions: These DO reduce both your AGI and MAGI. Traditional 401(k) contributions are pre-tax and are subtracted from your income before AGI is calculated. Health Care FSA contributions: These also reduce both AGI and MAGI because they're taken out pre-tax, before AGI calculation. Dependent Care FSA contributions: Same as Health Care FSA - these reduce both AGI and MAGI as they're pre-tax deductions. Health insurance premiums: This depends on how you pay them. If they're paid through a Section 125 cafeteria plan (pre-tax through your employer), then yes, they reduce both AGI and MAGI. However, if you pay them yourself after receiving your paycheck, they generally don't reduce AGI or MAGI. The key thing to remember is that pre-tax deductions taken before your paycheck is issued typically reduce AGI/MAGI, while most deductions you take when filing your taxes don't affect AGI but do reduce taxable income.

I was struggling with all this AGI/MAGI confusion last year! What helped me was using https://taxr.ai to analyze my previous returns and simulate different scenarios. It breaks down exactly how each deduction affects your AGI, MAGI, and taxable income - super helpful for planning! I uploaded my W-2 and benefits enrollment info, and it showed me precisely how much my 401(k), FSA, and health premiums were reducing my AGI. The visual breakdown made it way clearer than anything else I tried.

After seeing the recommendation, I gave https://taxr.ai a try, and I have to say I'm impressed! I've been wrestling with understanding how my retirement contributions and FSA would impact my student loan income-based repayment (which uses AGI), and it laid everything out clearly. It confirmed that my 401(k), HSA, and FSA all reduce my AGI, which directly lowers my student loan payments. It also helped me realize I should max out my HSA before putting extra in my Roth 401(k) since the HSA lowers my MAGI for premium tax credit eligibility. Definitely cleared up my confusion about which deductions affect which income calculations!

If you're trying to get answers directly from the IRS about which deductions reduce your AGI or MAGI, good luck getting through on the phone! I spent HOURS on hold trying to get clarification. Then I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they got me connected to an IRS agent in about 15 minutes instead of the 2+ hour wait I was experiencing before. The IRS agent confirmed everything about FSA and 401(k) reducing AGI, and also explained some nuances about how different health insurance arrangements affect MAGI calculations depending on whether they're cafeteria plans or not.

I need to eat my words. After my skeptical comment, I decided to try Claimyr just to prove it wouldn't work. I was trying to get clarity on how my employer-provided health insurance premiums affect my MAGI for premium tax credit calculations for my spouse who's on marketplace insurance. Not only did I get through to the IRS in about 20 minutes (versus the 2+ hours I spent the previous week), but the agent walked me through exactly how different pre-tax deductions affect both AGI and MAGI calculations. The agent confirmed that pre-tax health insurance, 401(k), HSA, and FSA all reduce AGI and most versions of MAGI, but different tax benefits use slightly different MAGI calculations. For ACA purposes, he confirmed that all of those pre-tax deductions help lower your MAGI.

One thing I learned the hard way - MAGI isn't just one calculation! There are different versions of MAGI depending on what tax benefit you're trying to qualify for. For example, MAGI for IRA contribution limits adds back some deductions that MAGI for ACA premium subsidies doesn't. So make sure you know WHICH MAGI calculation matters for your specific situation.

The distinction between AGI, MAGI, and taxable income is one of the most confusing parts of the tax code! It helps me to think of it like this: 1. Start with Gross Income (all income) 2. Subtract "above-the-line" deductions = AGI 3. Add back certain deductions = MAGI (varies by tax benefit) 4. Subtract standard/itemized deductions = Taxable Income So for your specific questions: - 401(k): Reduces Gross Income → reduces AGI → reduces most MAGI calculations - FSAs: Same as 401(k) - Pre-tax insurance premiums through employer: Same as 401(k) - Post-tax insurance premiums: Might be itemized deductions which DON'T reduce AGI/MAGI

This is such a great thread! I've been dealing with this same confusion for years. One thing that really helped me understand the practical impact was tracking how these deductions affected my actual tax situation over time. For anyone still confused about the AGI vs MAGI distinction, here's what I wish someone had told me earlier: focus on maximizing your pre-tax deductions first (401k, HSA, FSA, pre-tax insurance) because they help with almost everything - they reduce your AGI, most MAGI calculations, AND your current tax bill. The order I prioritize now is: 1. 401k up to employer match (free money) 2. HSA to maximum (triple tax advantage) 3. FSA for predictable medical/dependent care expenses 4. More 401k contributions 5. Then consider post-tax options like Roth IRA This strategy has helped me qualify for more tax credits and keep my income-based loan payments lower. The key insight from this thread is that these pre-tax deductions work across multiple tax benefits simultaneously!