Modified adjusted gross income

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Modified adjusted gross income
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Modified Adjusted Gross Income (MAGI or Modified AGI) is a modified person's total annual income that is less expenses, pension contributions, capital losses, etc., used as a basis to determine federal income tax[1].

Modified Adjusted Gross Income is the taxpayer's adjusted gross income with the following modifications[2]:

  1. The taxpayer must append back any exclusion taken for the following: interest exclusion that applied to savings bonds used to finance education, foreign earned income, foreign housing, U.S. possessions source income, if the taxpayer is a resident of Puerto Rico, Puerto Rican source income, amounts paid under an adoption assistance system of the employer, and, interest on qualified education loans.
  2. The taxpayer must introduce all tax-exempt interest, such as tax-exempt interest received on municipal bonds, that he or she gained or accrued during the tax year.

Examples of MAGI

There are a few examples of using modified adjusted gross income[3]:

  1. Tom Tomes is a single retired individual who has an adjusted gross income of $12,000, receives Social Security benefits of $7,000 a year, and has $1,500 of tax-exempt interest from a mutual fund. Tom is obliged to add his $1,500 of tax-exempt interest to his $12,000 adjusted gross income to arrive at a modified adjusted gross income of $13,500. Then he adds $3,500 (one-half of his Social Security benefits) to his modified adjusted gross income to give him a provisional income of $17,000. Because Tom's $17,000 provisional income does not exceed his $25,000 base amount, none of Tom's Social Security benefits is includible in his gross income.
  2. The Mapes - John and Jane - have an adjusted gross income of $24,000 per 1993. John is retired, that is why he receives Social Security benefits of $7,200 per year. The couple also collects $6,000 a year from a mutual fund that invests solely in tax-exempt municipal bonds. On their joint return for 1993, the Mapeses would make the computation to determine how much (if any) of John's Social Security benefits must be included in their gross income. Modified adjusted gross income includes adjusted gross income and all tax-exempt interest, in this case, it is $6,000. In other words, the modified adjusted gross income for the Mapeses is US$30,000.

MAGI Limit

The amount of the credit you can claim, if any, depends on your modified adjusted gross income (MAGI). MAGI for this purpose is adjusted gross income increased by the foreign earned income exclusion and certain other foreign items.

You can claim a full credit only if your modified adjusted gross income is below the phaseout range found in Table 4.1. You can claim a partial credit if your MAGI is within the phaseout range; no credit may be claimed if your MAGI exceeds the phase-out range.

Table 4.1 Phaseout Ranges for the DC Homebuyer Credit

Filing Status* D.C. Credit MAGI [$]
Joint return 110,000-130,000
Unmarried 70,000-90,000

Filing Status* - You cannot claim the credit if you are married filing separately[4].


  1. Bloomsbury Publishing, 2010, page 8
  2. A. Sacks, 2004, page 106
  3. A. Sacks, 2004, page 106
  4. B. Weltman, 2011


Author: Monika Mendak