How should I calculate the MAGI

Forum|Forum|1 year ago
March 23, 2025
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I am using Turbotax Home and Biz 2024 for my return, I'd like to know EXACTLY how the Modified Adjusted Gross Income (MAGI) should be calculated so I can decide how much my traditional IRA contribution is deductible.

The MAGI is referenced in 2 of the TT worksheets - IRA Deduction Worksheet (line #12) and Roth IRA Contribution Limit Worksheet (line #1) - but TT does not explicitly show how it was calculated. Based on the various numbers on various TT forms, it seems TT calculates the MAGI as the AGI + IRA deduction, but don't I need to know the MAGI first before the IRA deduction can be determined?

On form 1040, the adjusted gross income (AGI) is the difference between total income and Schedule 1 income adjustments, which requires IRA deduction (line #20) as well, which again depends on knowing MAGI first, which means, without MAGI, I should not be able to calculate the IRA deduction and, therefore, AGI.

Based on this IRS site, https://www.irs.gov/e-file-providers/definition-of-adju[product key removed]e#calculatemagi:

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MAGI for traditional IRA deductions

Take your AGI and add:

Student loan interest deduction
Excludable savings bond interest
Employer-provided adoption benefits excluded from income
Foreign earned income or housing excluded from income
Foreign housing deduction

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it seems TT's way of calculating MAGI for traditional IRA is wrong - if I do not have the 5 items listed, my MAGI should be the same as the AGI, am I wrong?

I have spent hours trying to wrap my head around this but I am totally lost.

Any help will be greatly appreciated.

Jun

TurboTax Home & Biz Windows

Best answer by dmertz

Thx @dmertz

- What I quoted was straightly from TT, maybe it needs to be updated if out of date.

- The following line is from Worksheet 1-1. Figuring Your Modified AGI, IRS Pub 590-A, regarding calculating MAGI for traditional IRA purpose:

Enter your adjusted gross income (AGI) from Form 1040, 1040-SR, or Form 1040-NR, line 11, figured without taking into account the amount from Schedule 1 (Form 1040), line 20

Exactly what does "figured without taking into account the amount from Schedule 1 (Form 1040),
line 20" mean here? The AGI is calculated without taking into account the IRA deduction amount (Schedule 1 line 20)? But that's not true because AGI is calculated by subtracting income adjustments (Schedule 1, line 26) from the total income, and income adjustments has IRA deduction figured in. Do I not understand English? lol

And again, my original question/confusion stands - don't I need to figure out the MAGI first before I can calculate the IRA deduction? Or, is it just as what you mentioned before, this is an experimenting process - you tell TT how much you want to contribute and TT tells you how much of that contribution is deductible?

Thirdly, TT calculates the MAGI by taking the AGI and adding back the IRA deduction, that does not seem to comply with the guide, does it? Not that I am obsessed with finding TT's error, but if it's wrong, a lot of people may end up with smaller amt of IRA deduction.

"Exactly what does "figured without taking into account the amount from Schedule 1 (Form 1040),
line 20" mean here?"

It essentially means treating your traditional IRA contribution as nondeductible during the calculation of your MAGI. On your completed tax return, it would mean adding back the amount on line 20, exactly as you see TurboTax doing.

Unless your MAGI is clearly above of below the phase-out range for your filing status, yes, the MAGI needs to be determined to know how much of a traditional IRA contribution would be deductible. As I said previously, you can enter the maximum permissible traditional IRA contribution, let TurboTax calculate the amount that would be deductible, then go back and change your contribution entry to be just what is deductible. Alternatively, you can enter $1 of traditional IRA contribution to cause TurboTax to prepare the Traditional IRA Contribution Worksheet, look at the worksheet to see the MAGI that TurboTax calculated, then do your own calculation of the maximum deductible contribution, although that's a lot more work.

KeshaH

The modified AGI on the IRA deduction worksheet comes from the 1040/104SR Worksheet. If you have the desktop program, you can navigate to this page to see how the MAGI is calculating.

JZ4284Author

@KeshaH appreciate the response.

Can you be more specific? On the 1040/104SR Worksheet I am not seeing any mention of "Modified Adjusted Gross Income" nor the MAGI number used on the IRA deduction worksheet, I did not even see the word "modified".

dmertz

Employee

To get the IRA Deduction Worksheet in TurboTax, you'll need to enter a proposed traditional IRA contribution. TurboTax will then inform you of the deductible amount of your proposed traditional IRA contribution. You can then go back an modify the proposed amount to be the actual amount that you intend to contribute. With a proposed IRA contribution entered, you can then review the IRA Information Worksheet to see the MAGI that TurboTax calculated. (Nowhere can you actually view the calculation of MAGI.)

You can calculate MAGI yourself using Worksheet 1-1 of IRS Pub 590-A:

https://www.irs.gov/pub/irs-pdf/p590a.pdf

JZ4284Author

Found some useful info from another thread - https://ttlc.intuit.com/community/taxes/discussion/can-turbotax-tell-me-my-magi-i-saw-the-article-that-explain-how-to-calculate-it-agi-plus-some/00/1929091/page/3, look at the post by Wyner2020 on February 27, 2024 8:51 PM.

Based on TT's explanation, it did calculate the MAGI by adding my deductible traditional IRA contribution and the AGI, but, as I mentioned in my original post, isn't this backward?

Again, based on this IRS site, Link to IRS to get the MAGI for traditional IRA deductions, I should take the AGI and add the following:

Student loan interest deduction
Excludable savings bond interest
Employer-provided adoption benefits excluded from income
Foreign earned income or housing excluded from income
Foreign housing deduction.

So, is TT wrong?

JZ4284Author

My understanding is MAGI determines how much of one's traditional IRA contribution is deductible, if at all, the higher the MAGI the smaller the deductible contribution. So the answer to my question might affect a lot of people.