A. Once you know what are covered by AGI and MAGI respectively, you can understand the differences between the AGI and MAGI easily.
AGI is your total income (including wages, interest, income from retirement accounts, capital gains, and alimony received) less certain “adjustments.”
Total Income includes the following items:
- Income from retirement accounts
- Capital gains
- Alimony received
Adjustments include the following items:
- Deductible IRA contributions
- 401(k) or 403(b) contributions
- Alimony payments
- Health insurance premiums (if you’re self-employed)
- Moving expenses
- Interest on student loans
Note that AGI does not reflect standard or itemized deductions. Nor does is it influenced by personal exemptions.
Modified AGI (MAGI)
In order to arrive at your MAGI, you need to add back the following items:
- Income you excluded due to the foreign earned income exclusion
- Any deductions for foreign housing
- Interest income for series EE bonds that you may have excluded because you used the proceeds to pay for qualified educational expenses
- Any deduction that you may have claimed for student loan interest or allowable tuition expenses
- Employer-paid adoption expenses
- Any deduction that you may have claimed for a traditional IRA contribution (note that employer plans, such as 401(k) and 403(b) contributions still reduce your MAGI)
Note: if you’re age 70-1/2 and receiving minimum distributions from a traditional IRA, these funds do not count against your MAGI.
A final note, it’s important to keep in mind that funds being converted from a traditional IRA to a Roth IRA do not count against your MAGI even though they may be taxable.