1. What is MAGI?

Modified Adjusted Gross Income (MAGI) is used to determine Roth IRA eligibility and contribution limits. It's calculated by taking your Adjusted Gross Income (AGI) and adding back certain deductions.

2. How Does the Calculator Work?

The calculator uses the standard MAGI formula:

Where:

• \( AGI \) — Your Adjusted Gross Income from tax return
• \( IRA\ Deductions \) — Traditional IRA contributions you deducted
• \( Student\ Loan\ Interest \) — Interest paid on student loans
• \( Foreign\ Income\ Exclusions \) — Income excluded under foreign earned income exclusion

Explanation: These items are added back to AGI because they were subtracted to calculate AGI but need to be included for Roth IRA purposes.

3. Importance of MAGI Calculation

Details: MAGI determines your eligibility to contribute to a Roth IRA and how much you can contribute. For 2023, single filers with MAGI under $138,000 can make full contributions, while those between $138,000-$153,000 can make reduced contributions.

4. Using the Calculator

Tips: Enter all amounts in dollars. You can find these numbers on your tax return (AGI on line 11 of Form 1040, IRA deductions on line 20, student loan interest on line 21, foreign income exclusion on Form 2555).

5. Frequently Asked Questions (FAQ)

Q1: Why is MAGI important for Roth IRAs?
A: Roth IRA contribution limits are based on MAGI. If your MAGI is too high, you may be ineligible to contribute or may need to reduce your contribution amount.

Q2: What other items might be added to AGI for MAGI?
A: Depending on the purpose, MAGI might also include tax-exempt interest, excluded employer adoption benefits, and other items.

Q3: Does MAGI affect traditional IRA deductions?
A: Yes, if you or your spouse is covered by a retirement plan at work, your MAGI affects whether you can deduct traditional IRA contributions.

Q4: How often do MAGI limits change?
A: The IRS typically adjusts Roth IRA income limits annually for inflation.

Q5: Where can I find my exact MAGI?
A: The IRS provides worksheets in Publication 590-A to calculate MAGI precisely for IRA purposes.