How to Calculate AGI and MAGI (Step-by-Step Guide)

To calculate your AGI, add up all income (wages, investments, retirement distributions) and subtract above-the-line deductions like IRA contributions and student loan interest. Your MAGI starts with AGI and adds back specific deductions depending on the tax benefit in question. Below is a step-by-step walkthrough with examples at different income levels.

Key Takeaways

• AGI = Total Income minus above-the-line deductions (Form 1040, Line 11).
• MAGI = AGI plus certain add-backs -- the exact add-backs depend on the tax benefit.
• For most W-2 employees, AGI and MAGI are the same number.
• MAGI controls Roth IRA eligibility, education credits, Medicare premiums, and more.

How to Calculate AGI (Adjusted Gross Income)

AGI is your total income minus specific “above-the-line” deductions. Unlike itemized deductions, you claim these whether or not you take the standard deduction.

Step 1: Add up all income sources

• W-2 wages and salary
• Self-employment income (Schedule C net profit)
• Investment income: interest, dividends, capital gains
• Rental income (Schedule E)
• Retirement distributions (401(k), IRA, pension)
• Unemployment compensation
• Social Security benefits (taxable portion)
• DoorDash and gig income (Schedule C)

Step 2: Subtract above-the-line deductions

• Traditional IRA contributions (if deductible)
• HSA contributions (up to $4,300 self-only / $8,550 family for 2025; $4,400 / $8,750 for 2026)
• Student loan interest (up to $2,500)
• Self-employment tax deduction (50% of SE tax)
• Self-employed health insurance premiums
• Educator expenses (up to $300)

The result is your AGI — it appears on Form 1040, Line 11.

How to Calculate MAGI (Modified Adjusted Gross Income)

MAGI starts with your AGI and adds back certain deductions. The key detail most people miss: the add-backs are different depending on which tax benefit you are evaluating.

MAGI for Roth IRA Eligibility

Start with AGI, then add back:

• Traditional IRA deduction
• Student loan interest deduction
• Foreign earned income exclusion
• Foreign housing exclusion

For most domestic W-2 earners, none of these apply — so MAGI = AGI. See our AGI vs. MAGI glossary entry for more detail.

MAGI for the Net Investment Income Tax (NIIT)

For the 3.8% NIIT surtax, MAGI equals AGI plus the net foreign earned income exclusion. The NIIT threshold is $200,000 (single) or $250,000 (married filing jointly).

MAGI for Medicare Premium Surcharges (IRMAA)

Medicare uses MAGI from two years prior to set Part B and Part D surcharges. MAGI for IRMAA equals AGI plus tax-exempt interest income (e.g., municipal bond interest).

MAGI for Education Credits

For the American Opportunity and Lifetime Learning credits, MAGI = AGI plus foreign earned income exclusion, foreign housing exclusion, and income from Puerto Rico or American Samoa.

Roth IRA Income Limits (MAGI-Based)

Your MAGI determines how much you can contribute directly to a Roth IRA. If your MAGI exceeds the limit, a backdoor Roth is still available.

If your MAGI falls in the phase-out range, you can contribute a reduced amount. Above the top end, the direct contribution limit drops to zero — but you can still use the backdoor Roth IRA strategy.

Worked Examples

Example 1: W-2 Employee, Single Filer

Line Item	Amount
W-2 wages	$85,000
Bank interest	$500
Total income	$85,500
Student loan interest deduction	-$2,500
AGI	$83,000
Add back: student loan interest	+$2,500
MAGI (for Roth IRA)	$85,500

This person’s AGI is $83,000 but their MAGI for Roth IRA purposes is $85,500. Both are well below the single-filer phase-out, so they can make a full Roth IRA contribution of $7,000 (2025) or $7,500 (2026).

Example 2: Self-Employed, Married Filing Jointly

Line Item	Amount
Spouse 1 — W-2 wages	$120,000
Spouse 2 — Schedule C net profit	$90,000
Investment dividends	$5,000
Total income	$215,000
Self-employment tax deduction (50%)	-$6,362
SEP IRA contribution	-$18,000
Self-employed health insurance	-$8,400
AGI	$182,238
MAGI (for Roth IRA)	$182,238

No Roth IRA add-backs apply here (SEP IRA deductions are not added back for Roth MAGI), so MAGI equals AGI. This couple is well within the MFJ phase-out range and can make full Roth IRA contributions.

Example 3: High-Income Earner Near the Phase-Out

Line Item	Amount
W-2 wages	$155,000
RSU income	$12,000
Total income	$167,000
Traditional IRA deduction	$0 (income too high)
AGI / MAGI	$167,000

This single filer’s MAGI of $167,000 falls within the 2026 phase-out range ($153,000 - $168,000), meaning their direct Roth contribution is reduced. They should consider the backdoor Roth for a full contribution instead.

Why AGI and MAGI Matter Beyond Roth IRAs

Your AGI and MAGI affect many parts of the tax code:

• Standard deduction vs. itemizing — AGI determines the threshold for medical expense deductions (7.5% of AGI) and charitable contribution limits (60% of AGI for cash)
• Earned income tax credit — AGI-based income limits
• Child tax credit — MAGI-based phase-out starts at $200,000 (single) / $400,000 (MFJ)
• Education credits — MAGI-based limits for AOTC and LLC
• Traditional IRA deductibility — MAGI determines if your contribution is deductible when covered by a workplace plan
• Medicare IRMAA surcharges — MAGI from two years prior sets your Part B/D premiums
• Net investment income tax — 3.8% surtax triggered by MAGI above $200k/$250k

How sharper.tax Helps

sharper.tax reads your AGI directly from your uploaded return and automatically calculates the relevant MAGI for every strategy — Roth IRA eligibility, Traditional IRA deductibility, NIIT exposure, and more. You never have to compute MAGI by hand. The same analysis a high-end CPA performs is now available for free.

Sources

• IRS Form 1040 Instructions
• IRS Publication 590-A — Contributions to IRAs (Roth MAGI definition)
• IRS Publication 590-B — Distributions from IRAs
• IRS Notice 2025-67 — 2026 Retirement Plan Limits
• IRS Topic 452 — Alimony and Separate Maintenance

The information above is educational and not tax advice.