How to Calculate Modified AGI

Your modified adjusted gross income (MAGI) helps the IRS decide how much of your IRA contributions you can deduct from your taxes, as well as any property rental losses or education expenses, depending on your income.
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Nobody enjoys paying taxes, and it can feel like the IRS taxes you on every penny you earn. But fortunately, it doesn't. When you file your taxes, you can make adjustments by taking certain deductions and credits that lower your gross income. This lowers the amount on which you must pay taxes. This lowered income is called your adjusted gross income (AGI).

However, sometimes the IRS requires you to add some of those deductions back to your AGI. After doing that, you're left with a number called the modified adjusted gross income (MAGI).

Usually, your AGI and MAGI amounts are very close, or even exactly the same, because most of the deductions that get added back aren't common ones. But it's important to calculate your MAGI in case it does affect your taxes. For example, if you have an IRA (individual retirement account), it may make a difference in your deductions. The IRS uses your MAGI to determine if you are eligible for certain credits or deductions -- primarily IRA deductions and Roth IRA contributions.

Keep reading to learn how your MAGI differs from your AGI, and how to calculate it on your taxes.