Kelly Bullis: What is Modified Adjusted Gross Income?

MAGI is not MAGA. One is a term for identifying folks who support a certain political orientation, the other seems to be used loosely for all kinds of purposes and is not exactly the same in all instances. In both cases, just saying it can trigger a very negative reaction from some folks.

It would appear that Congress got carried away with the term “MAGI” (Modified Adjusted Gross Income) when determining whether a person qualifies for certain tax related treatment. Such things as child credit, Medicare premium surcharges, American Opportunity Tax Credit (AOTC), net investment income tax, health premium tax credit, making ROTH IRA payins, etc.

Did you know that there are different MAGI for different uses? The one constant is that in all cases, “MAGI” starts with AGI (Adjusted Gross Income).

For Medicare premium surcharges, MAGI is AGI plus tax-exempt interest income.

For child credit, Social Security benefits taxation, health premium tax credit, the AOTC, and the net investment income tax, MAGI is AGI plus foreign earned income exclusion, foreign housing exclusion and any amounts excluded from gross income because they were received from sources in Puerto Rico, or American Samoa.

For net investment income tax, MAGI is AGI plus tax-free foreign earned income.

For student loan interest deduction, IRA deduction, self-employment tax deduction, excluded foreign income, other tax-exempt income, and Social Security benefits, to compute MAGI, you start with AGI, then add back that item.

I bet most of you are wondering what demented person writes all these stupid tax laws. I give you one guess … Congress. They don’t seem to know how to get a simple term straight. MAGI.

Folks, we all like to gripe about how stupid and complicated our American tax laws are. Filling out your tax return is not as easy as just writing a couple of numbers down on a postcard and sending it to the IRS. It’s been since 2017 that we had our last large tax law change. It runs out in 2025 and the politicians (not just Congress, but the current President and some of his advisors too) are coming out of the woodwork to propose new stupid tax law changes. New laws are bad enough, but when they can’t even use the same definition for a common term, it 

just about hits the top of the “stupid meter.”

Have you heard? 2 Kings 14:23b-24a says, “…Jeroboam the son of Joash king of Israel began to reign in Samaria for 41 years. He did that which was evil in Yahweh’s sight.”

Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459, on the web at BullisAndCo.com or also on Facebook.