AGI vs MAGI, Without the Headache

By Tom, CPA · Updated October 27, 2026

Part of: Tax Planning

TL;DR: AGI is total income minus above-the-line adjustments. MAGI is AGI with items added back, and each rule has its own version: Roth IRA, ACA, IRMAA and NIIT differ. Deductions after AGI do not help. Pre-tax savings, HSAs, QCDs and timing are the main levers.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

The tax code is 4 million words long, and one of its favorite tricks is defining the same term several different ways. Adjusted gross income (AGI) is a single line on your Form 1040. Modified adjusted gross income (MAGI) is not a line anywhere. It is AGI with certain items added back, and the items depend on which benefit you are testing. Roth IRA MAGI is different from ACA MAGI, which is different from Medicare IRMAA MAGI.

This guide defines AGI, walks through the main MAGI versions, lists the 2026 thresholds that use them, and shows how to manage income around the cliffs. Figures are for 2026, as of Oct 2026.

CPA Warning Label: MAGI definitions differ by program, and some carry hard cliffs. Check the exact definition before planning a Roth conversion or large sale around a threshold.

AGI: the starting point

AGI is your total income minus "above-the-line" adjustments. It appears on Form 1040 after total income and Schedule 1 adjustments.

Adjustments that reduce AGI include: deductible traditional IRA contributions, HSA contributions made outside payroll, half of self-employment tax, self-employed health insurance, self-employed retirement contributions (SEP, solo 401(k)), student loan interest (phased out between $85,000 and $100,000 of MAGI single, $175,000 to $205,000 joint, in 2026), and educator expenses.

Also lowering AGI, invisibly: pre-tax payroll deductions. Traditional 401(k) deferrals, payroll HSA contributions, health premiums under a cafeteria plan and dependent care FSA amounts never show up in W-2 box 1, so they never enter AGI at all.

Not affecting AGI: the standard deduction, itemized deductions, the QBI deduction, and the Schedule 1-A deductions for tips, overtime, car loan interest and seniors. Those reduce taxable income, but they come after AGI. That is why a big itemized deduction does not help with ACA credits or IRMAA.

The main MAGI versions

For most U.S.-based households without foreign income, MAGI for Roth, IRA and NIIT purposes is close to AGI. The big differences show up for retirees: tax-exempt muni interest and nontaxable Social Security count for ACA, and muni interest counts for IRMAA. Switching to municipal bonds does not hide income from these tests.

2026 thresholds that use AGI or MAGI

• Roth IRA contributions: phase out between $153,000 and $168,000 single, $242,000 and $252,000 joint.
• Net investment income tax: 3.8% on the lesser of net investment income or MAGI above $250,000 joint, $200,000 single, $125,000 married filing separately. Not indexed.
• Additional Medicare tax: 0.9% on wages above the same thresholds.
• Senior deduction: $6,000 per person 65+ for 2025 through 2028, phasing out above $75,000 single or $150,000 joint MAGI.
• Child tax credit: phases out above $200,000, or $400,000 joint.
• SALT cap: $40,400, reduced above $505,000 MAGI, not below $10,000.
• Medical expense deduction: only expenses above 7.5% of AGI.
• IRMAA: Medicare Part B and D surcharges begin at MAGI thresholds set annually by Social Security, using your return from two years earlier. See IRMAA planning.
• ACA premium tax credit: based on household MAGI relative to the federal poverty level. See ACA MAGI management.

Levers that lower AGI and MAGI

• Pre-tax 401(k) or 403(b): up to $24,500 in 2026, plus catch-up.
• HSA: $4,400 self-only, $8,750 family.
• Deductible traditional IRA: $7,500 (plus $1,100 catch-up at 50+), if eligible.
• Self-employed retirement plans: SEP or solo 401(k) contributions.
• Qualified charitable distributions: from IRAs at age 70½+, up to $111,000 in 2026. They satisfy RMDs without entering AGI, which beats an itemized charitable deduction for MAGI purposes.
• Tax-loss harvesting: up to $3,000 of net capital loss against ordinary income. See the capital loss limit.
• Timing: choose which year to realize gains, convert to Roth, or take IRA withdrawals.
• Asset location: hold high-income assets in tax-advantaged accounts. See tax diversification.

One more lever for W-2 workers: check whether your employer offers a pre-tax dependent care FSA ($7,500 per household in 2026) or commuter benefits. Both reduce W-2 wages, and therefore AGI and every MAGI built from it, without you ever seeing the deduction on your return.

Things that do not lower MAGI: itemized deductions, municipal bond interest (for ACA and IRMAA), Roth withdrawals (which do not raise it either), and the new Schedule 1-A deductions.

Illustration: one number, three tests

Illustration: a married couple, both 66, retired. Their 2026 income:

• Senior deduction MAGI: $117,500, under $150,000, so they get $6,000 each, $12,000 total.
• IRMAA MAGI: $117,500 + $10,000 muni interest = $127,500. Compare to the IRMAA brackets that will apply in 2028.
• NIIT MAGI: $117,500, far below $250,000.

If they convert $40,000 to Roth this year, AGI rises to $157,500 and the senior deduction begins to phase out ($7,500 over $150,000). That loss of deduction raises the effective cost of converting the last few thousand dollars. Converting $32,500 keeps them at $150,000.

Assumptions: simplified; their taxable Social Security is already at the 85% maximum, so extra conversion income does not raise it further here. At lower incomes it would, which changes the numbers.

Early retirees: engineering MAGI on purpose

For early retirees, MAGI is less a number you report and more a number you choose. Once paychecks stop, most income comes from decisions: how much to withdraw from which account, which shares to sell, how much to convert. That control is valuable.

• Spend from taxable accounts first, selectively. Selling shares with high basis produces little gain, so you can fund a year of spending with modest MAGI.
• Use cash and Roth contributions as a buffer. Withdrawals of Roth IRA contributions (not earnings) and cash savings do not count in MAGI at all.
• Fill brackets deliberately. Convert pre-tax money to Roth or harvest gains up to a chosen MAGI target: the top of the 12% bracket, the edge of an ACA subsidy band, or below an IRMAA tier two years out.
• Coordinate with health coverage. Marketplace premium credits are reconciled on your return. If your actual MAGI ends up higher than estimated, you may repay some or all of the advance credit.
• Remember the household. A spouse's part-time job or a dependent's income can change the ACA math.

A spreadsheet with your projected AGI, each MAGI version, and the thresholds that matter to you is one of the most useful tools in early retirement tax planning. Update it in November, when you know most of the year's numbers but still have time to act.

Common mistakes

• Assuming a big itemized deduction lowers AGI. It does not.
• Forgetting that Roth conversions raise AGI and ACA MAGI in the year of conversion, even though they are excluded for Roth contribution MAGI.
• Ignoring the two-year IRMAA lookback. A large sale at 63 can raise Medicare premiums at 65.
• Forgetting a spouse's income for ACA household MAGI, or a dependent's income when the dependent is required to file a return.
• Using AGI from the wrong year. IRMAA uses two years back; ACA uses the current year's actual figure.
• Assuming last year's thresholds still apply. Many are indexed annually, but the NIIT and additional Medicare thresholds are not.
• Treating muni interest as invisible. It counts for ACA and IRMAA and for taxing Social Security.

Read where AGI appears on your return in how to read Form 1040, and see the tax planning hub.