Which federal tax credits and deductions use MAGI instead of AGI to determine eligibility?
Executive summary
Major federal tax benefits use a “modified adjusted gross income” (MAGI) — not plain AGI — to set eligibility and phaseout thresholds for items like Roth IRA contributions and conversions, Traditional IRA deduction limits, education credits, the Premium Tax Credit (Marketplace health subsidies), and income-related Medicare adjustments (IRMAA) [1] [2] [3] [4]. The specific MAGI calculation varies by program: the ACA/Marketplace adds untaxed foreign income, non‑taxable Social Security benefits and tax‑exempt interest to AGI, while IRA and education‑credit worksheets add back different deductions [3] [5] [1].
1. MAGI is not one single number — programs define it differently
The IRS and agencies use AGI as the starting point, but each credit or deduction tells you which “add‑backs” to include when turning AGI into MAGI; that means MAGI for the Premium Tax Credit (Marketplace) is computed differently than MAGI for IRA deduction limits or education credits [5] [3] [1]. Sources repeatedly state MAGI equals AGI plus certain items, but emphasize the list of additions varies by benefit [6] [7].
2. Retirement rules: Roth IRA eligibility and Traditional IRA deduction use MAGI
Eligibility to contribute to a Roth IRA and whether you can deduct Traditional IRA contributions are both determined using MAGI, with statutory phaseout ranges that change year to year; guidance and worksheets for “figuring your modified AGI” apply specifically to these IRA tests [1] [6]. Multiple tax guides list MAGI as the controlling figure for Roth limits and the IRA deduction phaseouts [1] [2].
3. Education tax credits and student‑loan interest hinge on MAGI
The American Opportunity Credit, Lifetime Learning Credit and certain student‑loan interest deduction phaseouts are based on MAGI. Tax guidance and tax‑preparer sites warn these credits use MAGI (not straight AGI) and require adding back particular exclusions when you compute eligibility [1] [2] [8].
4. Health‑care subsidies and Medicaid/CHIP use an ACA‑specific MAGI
Marketplace premium tax credits, most Medicaid categories, and CHIP determine eligibility using the ACA version of MAGI — AGI plus tax‑exempt interest, non‑taxable Social Security benefits, and excluded foreign income (for example, foreign earned income exclusion) — and state agencies apply this MAGI definition [3] [9]. HealthCare.gov and related analyses explicitly list the three categories added to AGI for ACA purposes [3] [10].
5. Other programs & thresholds: NIIT and Medicare IRMAA reference MAGI
Net Investment Income Tax (NIIT) and income‑related Medicare premium adjustments use MAGI or MAGI‑like measures to determine thresholds (e.g., NIIT applies when MAGI exceeds $200,000 single/$250,000 joint; IRMAA brackets reference MAGI for Medicare Part B/D premiums) — though exact add‑backs and thresholds are specified in the rules for each program [2] [4]. Bankrate and other tax explainers tie MAGI into these non‑credit tests too [1] [4].
6. Practical consequence: excluded or tax‑free income often gets added back
Across the sources, common additions when computing MAGI include tax‑exempt interest (municipal bond interest), excluded foreign earned income/foreign housing, and the nontaxable portion of Social Security — items that reduce AGI or aren’t counted in taxable income but are often counted for MAGI‑based limits [3] [2] [9]. Expat guides and specialty tax sites stress the foreign earned income exclusion lowers AGI but is added back into MAGI, which can disqualify taxpayers from subsidies or contributions [11].
7. Limitations in available reporting and where to look next
Available sources list the main benefits that use MAGI and outline common add‑backs, but none here present an exhaustive, single table of every federal credit/deduction that uses MAGI nor do they reproduce every program’s exact worksheet language — the IRS says you must “repeat steps 1 to 3 for that one” when computing MAGI per benefit [5]. For precise calculations and 2025 thresholds consult the IRS worksheets/publications for each credit (e.g., IRA Worksheet 1‑1, the Premium Tax Credit rules) or a tax professional [1] [5].
8. Competing viewpoints and implicit agendas in guidance
Consumer tax sites (TurboTax, H&R Block, Fidelity, Bankrate) present MAGI as a practical checklist for taxpayers and emphasize common add‑backs; health‑policy sites focus on the ACA’s specific MAGI definition and its policy effects for subsidies [6] [2] [3]. These providers may implicitly frame MAGI in terms that favor their audience — do‑it‑yourself filers, expats, or insured consumers — so cross‑checking IRS worksheets for the specific benefit matters [6] [11] [3].
If you want, I can produce a focused checklist of the specific credits and deductions named across these sources with their commonly cited MAGI additions and the exact 2025 phaseout ranges those sources list [1] [4].