Why it is important.
Like your AGI, your MAGI can determine whether you qualify for certain tax benefits. One of the most popular is the ability to deduct your IRA contributions on your tax return. However, you may not qualify for that deduction if your MAGI is above a certain level.
Your MAGI differs from your AGI in that it may be higher, with certain adjustments added back. (These are the same adjustments that were previously subtracted from your income to arrive at your AGI.) For example, the alimony payments that were subtracted from your income for AGI purposes must be added back to calculate your MAGI.
Some items that can increase your MAGI include the following:
• Tuition-related costs and deductions
• IRA contributions
• Rental losses
• Student loan interest
Key things to remember to keep the MAGI is to
- Max out your tax-deferred retirement plans
- Max out your HSA contributions
For a married couple who can bring MGAI to less than 101,000 can contribute another 5500+5500 towards traditional IRA to save more tax.
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