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Small Business Employee Benefits and HR Blog

Quick Guide: List of MAGI Deductions and Adjustments

Modified Adjusted Gross Income (MAGI) is an  important calculation when determining whether or not you qualify for a number of tax credits, benefits, and exclusions -- making it ever important for tax purposes.

Yet, many individuals and small business owners are not crystal clear on what can be deducted when calculating their MAGI. So, in order to clear up some confusion, and to help you calculate your MAGI, here’s a comprehensive list of various MAGI deductions and adjustments.List_of_MAGI_Deductions_and_Adjustments

But First, Important AGI Deductions

Before you calculate your MAGI, it’s important to understand Adjusted Gross Income (AGI) deductions as well. Why? You must know your AGI in order to determine MAGI. Here is a list of applicable deductions.

  • IRA and self-employed retirement plan contributions

  • Alimony payments

  • Self-employed health insurance payments

  • One-half of any self-employment taxes paid

  • Health savings account deductions

  • Penalties on the early withdrawal of savings

  • Educator expenses

  • Student loan interest

  • Moving expenses

  • Tuition and fees

  • Deductions for domestic production activities

  • Certain business expenses of performing artists, reservists, and fee-basis government  officials

Important MAGI Deductions and Adjustments

Once you have gone through your AGI deductions, you can now apply the following deductions and adjustments to find your MAGI.

  • Student loan interest

  • One-half of self-employment tax

  • Qualified tuition expenses

  • Tuition and fees deduction

  • Passive loss or passive income

  • IRA contributions, taxable social security payments

  • The exclusion for income from U.S. savings bonds

  • The exclusion under 137 for adoption expenses

  • Rental losses

  • Any overall loss from a publicly traded partnership

What’s Next?

Now that you understand what to deduct when calculating your MAGI, where do you go from here? If you’re like most people and are unsure how to calculate MAGI, you’re not alone. Don’t worry, we’re here to help! Below is a list of some of our best resources to help you calculate your MAGI easily, learn what it’s used for, and find out what role it plays in small businesses.

Conclusion

MAGI used in many different situations including determining whether or not you qualify for a number of credits, benefits, and exclusions. And understanding what is a deduction can be the difference between qualifying for various credits or not. As such, it’s important for you to be well aware and educated as to which deductions apply to you.

Do you have any questions about MAGI deductions? If so, leave them here!

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