Ask the Editor, October 31: Modified Adjusted Gross Income

Each week, in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on topics submitted by readers. This week, she’s looking at four questions on the meaning of modified adjusted gross income, or MAGI. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. MAGI — general rules

Question: I keep seeing references to modified adjusted gross income in stories about federal income tax breaks. What is modified adjusted gross income?

Joy Taylor: The IRS and other federal agencies often use a taxpayer’s modified adjusted gross income (MAGI) to determine eligibility for certain benefits or tax breaks, or to figure out whether a taxpayer owes surtaxes or surcharges. True to the complexity of the federal tax code, there is not just one definition of MAGI. The meaning differs, depending on what it is used for.

However, the one constant of MAGI is that it always starts with adjusted gross income, which is the amount shown on line 11 of your Form 1040 or Form 1040-SR.

To learn more, see The Many Definitions of Modified Adjusted Gross Income (MAGI)

2. MAGI and five OBBB deductions

Question: What is the definition of MAGI for the new $6,000 senior deduction?

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Joy Taylor: The “One Big Beautiful Bill” (OBBB) provides five new or enhanced temporary tax breaks for individual taxpayers that first take effect on 2025 tax returns filed next year. All of these deductions begin to phase out for taxpayers with MAGI over a certain amount, as shown below.

• The $6,000 deduction for filers age 65 or older ($12,000 on joint returns if each spouse is 65 or older) begins to phase out for taxpayers with MAGI over $150,000 on joint returns and $75,000 on single and head-of-household returns.
• The up-to-$12,500 ($25,000 on joint returns) deduction for qualified overtime compensation begins to phase out for taxpayers with MAGI over $300,000 on joint returns and $150,000 on other returns.
• The up-to-$25,000 deduction for qualified tips begins to phase out for taxpayers with MAGI over $300,000 on joint returns and $150,000 on other returns.
• The up-to-$10,000 deduction for interest paid on a loan to buy a new vehicle begins to phase out for taxpayers with MAGI over $200,000 on joint returns and $100,000 on other returns.
• The $40,000 cap on deducting state and local taxes (SALT) on Schedule A of the 1040 begins to phase out (but not below $10,000) for taxpayers with MAGI over $500,000 on joint, head-of-household and single returns, and $250,000 for married couples who file separate returns.

For purposes of all five of these new OBBB deductions, MAGI is your adjusted gross income shown on line 11 of your tax return, plus any foreign earned income exclusion, foreign housing exclusion, and certain excluded income received from sources in Puerto Rico, American Samoa, Guam or the Northern Mariana Islands.

3. MAGI and Medicare premiums

Question: I’m planning to enroll in Medicare in the next couple of years, and I want to avoid paying higher monthly Medicare premiums. What is the definition of MAGI for Medicare purposes?

Joy Taylor: Most people on Medicare pay the basic fee for Medicare Part B coverage, which for 2025 is $185.00 per month. Many also sign up for Part D prescription drug coverage. Some Medicare enrollees pay higher Part B and D monthly premiums if their MAGI exceeds a certain figure. For 2025 Medicare coverage, monthly premium surcharges (also known as IRMAA surcharges) kick in for joint filers with MAGI over $212,000, and for single filers with MAGI over $106,000. Updated amounts have not yet come out for 2026. The surcharges increase as MAGI rises.

The Medicare premium surcharges are calculated using MAGI reported on the most recently filed federal income tax return. For most people, 2025 Medicare premium surcharges are based on MAGI from 2023 returns, the amounts for 2026 will be based on MAGI from 2024 returns, and the amounts for 2027 will be based on MAGI from 2025 tax returns that you will file next year.

MAGI for this purpose is AGI shown on line 11 of your Form 1040 or 1040-SR plus any tax-exempt interest income.

4. Qualified charitable distributions

Question: I am 74 and am enrolled in Medicare. If I make a $25,000 qualified charitable distribution directly from my traditional IRA to charity this year, will this impact my MAGI that is used to calculate surcharges on my 2027 monthly Part B and D Medicare premiums?

Joy Taylor: For traditional IRA owners 70½ or older, a tax-smart way to give to charity is a qualified charitable distribution (QCD). You can transfer up to $108,000 directly from your IRA to charity in 2025. These QCDs are not taxable to you, they are not added to your adjusted gross income, and they can count toward your annual required minimum distribution (RMD) if done correctly. Note that you cannot deduct the QCD as a charitable contribution on Schedule A of the Form 1040.

As I stated in the prior paragraph, one of the benefits of doing a QCD is that it will not be included in your adjusted gross income and thus won’t affect your MAGI. So, if done right, doing a QCD can keep you under the MAGI threshold for higher Medicare premiums.

Let’s use your example of a $25,000 charitable contribution. Say you have a $75,000 RMD for 2025. If you take the full RMD as a taxable transfer, you will have $75,000 of income added to both your 2025 MAGI and taxable income. If you then make a $25,000 charitable contribution by personal check, you would be able to claim that as a deduction on Schedule A of your tax return, which would reduce your taxable income, but not your adjusted gross income or MAGI. If instead, you make the $25,000 charitable contribution through a QCD, and you do it in a timely manner so that it offsets $25,000 of your $75,000 RMD for 2025, you would be treated as receiving only a $50,000 taxable RMD, which would be added to both your adjusted gross income (and MAGI) and to your taxable income.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill and more. We will continue to answer these in future Ask the Editor round-ups. So keep those questions coming!

More Reader Questions Answered

• All Ask the Editor Q&As
• Ask the Editor: Reader Questions on QCDs
• Ask the Editor: Reader Questions on QCDs and Tax Planning
• Ask the Editor: Questions on the New Tips Deduction
• Ask the Editor: Questions on Four New Tax Deductions
• Ask the Editor: Question on SALT Deduction
• Ask the Editor: Questions on the $6,000 Senior Deduction