Definition
Adjusted gross income with certain items added back, such as tax-exempt interest or excluded foreign income. Different rules use slightly different MAGI recipes, but it is the eligibility number for Roth IRA contributions, health insurance subsidies, education credits, and income-based Medicare premium surcharges.
Why it matters
MAGI is where cliffs live: a few hundred dollars of extra income can phase out a Roth contribution or trigger a Medicare surcharge. Pre-tax 401(k) and HSA contributions lower MAGI, which makes them useful levers near a threshold; Roth contributions do not.
Example
A retired couple's AGI is $206,000, and adding back $4,000 of tax-exempt municipal bond interest puts MAGI at $210,000, the number their Medicare premium surcharge is judged against. A younger couple checking Roth IRA eligibility uses a slightly different MAGI recipe, which is why the fine print names the version.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.