To calculate Modified Adjusted Gross Income (MAGI), specific deductions are added back to your Adjusted Gross Income (AGI). The exact deductions depend on the tax benefit or credit being claimed, but common add-backs include:
1. Foreign income exclusions
- Foreign earned income exclusion
- Foreign housing exclusion/deduction
2. Education-related deductions
- Student loan interest deduction (for IRA contribution eligibility)
- Excluded savings bond interest used for education
3. Other adjustments
- Excluded employer-provided adoption benefits
- Tax-exempt interest (for Premium Tax Credit calculations)
Examples by tax benefit:
- Traditional IRA deductions require adding back foreign exclusions, excluded savings bond interest, and adoption benefits.
- Education credits (like the American Opportunity Credit) require adding foreign exclusions and Puerto Rico/American Samoa income exclusions.
- Premium Tax Credits include tax-exempt interest and certain foreign income.
Always confirm the exact add-backs for your specific tax situation, as MAGI formulas vary by credit/deduction.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-specific-deductions-are-added-back-to-calculate-magi/
