What Is MAGI and Why It Matters for Your Taxes

MAGI (modified adjusted gross income) is your adjusted gross income with certain items added back, and the add-backs change depending on which tax benefit you are testing. For many 2026 rules (the tips, overtime, senior, and car-loan deductions, the SALT cap phase-down, NIIT, the child tax credit, and the student loan interest deduction), MAGI is simply AGI plus any foreign income you excluded. Roth IRA contributions, ACA premium tax credits, and Medicare IRMAA each use their own versions.

To run your numbers, the MAGI calculator starts from AGI and lets you enter the common add-backs. The rest of this guide explains which add-backs apply to which rule, the 2026 thresholds, and the levers that actually lower MAGI.

AGI vs. MAGI: why there are two numbers

AGI is total income minus "above-the-line" adjustments: deductible traditional IRA contributions, HSA contributions, student loan interest, half of self-employment tax, self-employed retirement contributions, and similar items on Schedule 1. Pre-tax 401(k) deferrals and health insurance premiums paid through payroll never reach AGI because they are already left out of W-2 box 1. AGI is on Form 1040 line 11.

MAGI exists because Congress wanted some benefits to be based on a fuller picture of income. When a rule says "modified," it names the add-backs. The most common are:

• Foreign earned income and housing exclusions (Form 2555) and the Puerto Rico and possession exclusions (sections 931 and 933)
• Tax-exempt interest, mainly municipal bonds (Form 1040 line 2a)
• The nontaxable part of Social Security benefits
• The deduction or exclusion being tested, such as the IRA deduction or the student loan interest deduction

Deductions that come after AGI (the standard deduction, itemized deductions, the QBI deduction, and the Schedule 1-A deductions) never reduce MAGI.

Which MAGI applies to which tax benefit? (2026 table)

The sources: retirement figures from IRS Notice 2025-67; the Roth worksheet in Publication 590-A; the Schedule 1-A phaseouts in the IRS One Big Beautiful Bill provisions page; other inflation-adjusted figures in Rev. Proc. 2025-32; the PTC definition in the Form 8962 instructions; the IRMAA definition in SSA's POMS HI 01101.010; and the rental allowance in the Form 8582 instructions.

How the phaseouts reduce each deduction differs. The tips and overtime deductions drop by $100 for each $1,000 of MAGI over the threshold. The car loan interest deduction drops by $200 per $1,000. The senior deduction drops by 6% of the excess for each eligible spouse. The senior deduction calculator and the car loan interest deduction guide work through those.

Worked example 1: one person, three MAGIs

A single filer in 2026 has $148,000 of wages, $6,000 of long-term capital gains, $3,000 of municipal bond interest, and a $4,400 HSA contribution. She also converts $20,000 from a traditional IRA to a Roth IRA.

• AGI: $148,000 + $6,000 + $20,000 conversion − $4,400 HSA = $169,600
• Roth IRA MAGI: $169,600 − $20,000 conversion = $149,600, below $153,000, so she can contribute the full $7,500
• NIIT MAGI: $169,600, below $200,000, so no NIIT
• IRMAA-style MAGI (it will matter in two years if she's on Medicare): $169,600 + $3,000 muni interest = $172,600, which would fall in the third surcharge tier on the 2026 table

The conversion doesn't touch her Roth contribution eligibility, but it does count for every other test. Without the conversion, her IRMAA-style MAGI would be $152,600.

Worked example 2: an early retiree couple and the ACA cliff

A married couple, both 62, buy 2026 marketplace coverage. They have $60,000 of IRA withdrawals, $8,000 of qualified dividends, $4,000 of municipal bond interest, and $20,000 of Social Security benefits.

1. Provisional income for Social Security: $68,000 + $4,000 + 50% × $20,000 = $82,000
2. Taxable Social Security: the lesser of 85% × $20,000 = $17,000 or 85% × ($82,000 − $44,000) + $6,000 = $38,300, so $17,000
3. AGI: $60,000 + $8,000 + $17,000 = $85,000
4. ACA MAGI: $85,000 + $4,000 tax-exempt interest + $3,000 nontaxable Social Security = $92,000

For a household of two, 400% of the 2025 poverty guideline (the guideline year used for 2026 coverage) is 4 × $21,150 = $84,600. At $92,000 they are over the line, and Pub 505 for 2026 says there is no premium tax credit above 400%. Any advance credit paid during the year has to be repaid in full, because the repayment caps were also removed for 2026.

The fix has to cut $7,400 or more of MAGI. Bronze and catastrophic marketplace plans count as HSA-compatible starting in 2026 under IRS Notice 2026-5. A family HSA contribution of $8,750 (plus $1,000 catch-up for each spouse 55+ with their own HSA) would bring ACA MAGI to $83,250 or lower. So would drawing $8,000 less from the IRA and covering the gap from a taxable account or cash.

How does ACA MAGI work in 2026?

ACA "household income" is the MAGI of you, your spouse, and any dependents who are required to file a return. It includes all three add-backs: tax-exempt interest, nontaxable Social Security, and excluded foreign income.

400% of the federal poverty line for 2026 marketplace coverage (48 states and DC), using the 2025 guidelines from HealthCare.gov:

Alaska and Hawaii have higher guidelines. The cutoff is a cliff, not a phaseout. One dollar over 400% removes the entire credit for the year. The ACA premium tax credit calculator shows what the credit is worth at your income and how much room you have under the line.

How does Medicare IRMAA use MAGI?

Social Security sets Part B and Part D surcharges from your tax return two years earlier. For IRMAA, MAGI is AGI plus tax-exempt interest. The 2026 tiers from CMS, based on 2024 returns:

The tiers are cliffs too. A single filer at $109,001 pays $81.20 a month more for Part B than one at $109,000, or $974.40 a year, plus the Part D surcharge, and both spouses pay it on a joint return. Married people filing separately who lived with their spouse go straight to the $649.20 tier above $109,000.

Because of the two-year lookback, your income from about two years before you enroll (typically the year you turn 63) sets your first Medicare premiums, so a large Roth conversion or home sale at that age shows up later as higher premiums. If your income dropped because of a life-changing event such as retirement, marriage, divorce, or the death of a spouse, you can ask Social Security to use a more recent year with Form SSA-44.

How the Roth IRA phaseout is calculated

Within the phaseout range, your limit shrinks in proportion to how far into the range you are:

Reduced limit = $7,500 × (top of range − MAGI) ÷ size of range

A single filer with $160,500 of Roth MAGI is $7,500 into the $15,000 range, so the limit is $7,500 × $7,500 ÷ $15,000 = $3,750. Pub 590-A rounds the result up to the next $10 and allows at least $200 if the result isn't zero. Savers 50 and older use $8,600 instead of $7,500.

If your MAGI is over the range, a backdoor Roth (a nondeductible traditional IRA contribution followed by a conversion) is the usual route. If you already made a direct contribution that MAGI doesn't allow, fix it by the extended filing deadline: see how to fix an excess Roth IRA contribution and size the correction with the excess Roth IRA contribution calculator.

How to lower your MAGI

These moves reduce AGI, which flows into every version of MAGI:

• Pre-tax 401(k), 403(b), or 457 deferrals. Up to $24,500 in 2026, plus $8,000 at age 50+ or $11,250 at ages 60 to 63.
• HSA contributions. $4,400 self-only or $8,750 family in 2026, plus $1,000 at 55+. Payroll HSA contributions also skip FICA.
• Dependent care and health FSAs. Up to $7,500 for a dependent care FSA and $3,400 for a health FSA in 2026, both excluded from wages.
• Deductible traditional IRA contributions. Only useful if you are under the deduction phaseouts in the table above.
• Self-employed retirement plans. SEP and solo 401(k) contributions are above-the-line deductions.
• Capital loss harvesting. Losses offset gains in full, plus up to $3,000 of other income per year.
• Qualified charitable distributions (age 70½ and older). Money sent from an IRA directly to charity isn't included in AGI, unlike a withdrawal followed by a deductible gift.

These moves change MAGI for some tests but not others:

• Municipal bonds keep interest out of AGI, but it's added back for ACA and IRMAA.
• Roth conversions raise MAGI for everything except the Roth contribution test. Size them with the Roth conversion calculator so you stay under the next IRMAA tier or the 400% line.
• Timing a bonus, a business sale, or a large gain across December 31 moves MAGI between tax years. For IRMAA, the year you pick also decides which Medicare year pays for it.

These moves don't reduce MAGI at all: itemizing, the standard deduction, the QBI deduction, and the Schedule 1-A deductions for tips, overtime, car loan interest, and seniors.

Common MAGI mistakes

• Using taxable income instead of AGI. Taxable income is after deductions and is almost always lower than MAGI.
• Assuming one MAGI fits every rule. The same return produced $149,600, $169,600, and $172,600 in the first example.
• Ignoring dependents' income for ACA. A dependent who is required to file adds their MAGI to household income.
• Forgetting the nontaxable part of Social Security for ACA. It's excluded from AGI but added back for the premium tax credit.
• Filing separately to manage Roth eligibility. Married filing separately (and living together) gives a Roth phaseout of $0 to $10,000.
• Counting the Saver's Match like the Saver's Credit. The Saver's Match that starts in 2027 has its own rules; see the Saver's Match guide.

Putting it together

Start with AGI, then add back only the items the benefit you care about names. For most of the new 2026 deductions and phaseouts, that's just excluded foreign income. For Roth contributions, back out conversions and add the IRA and student loan deductions. For the ACA and Medicare, add tax-exempt interest, and for the ACA also add nontaxable Social Security. Then check where you sit against each threshold before year-end, while 401(k), HSA, and Roth conversion decisions can still change the result. The 2026 IRS inflation adjustments guide and the OBBBA tax changes guide list the other 2026 numbers that depend on income.