What is modified Adjusted Gross Income (MAGI)

Modified adjusted gross income is your AGI plus certain adjustments added back. 
Common additions include:

• Tax-exempt interest income. 
• Foreign earned income and housing exclusions. 
• Passive income and loss adjustments. 
• IRA contributions or student loan interest deductions made.

Your gross annual income is the total income that you earn before any taxes or deductions are made. 
This includes:

• Salary or wages. 
• Bonus and commissions. 
• Rental Income.
• Business income.. 
• Investment Income made, such as dividends, interest, and capital gains.

The primary purpose of the modified gross income is to determine eligibility for certain tax benefits and deductions. These benefits and deductions include:

• IRA contributions
• Premium tax credits for health insurance
• Deduction eligibility for the student loan interest. 
• And the other federal tax credits and benefits.

MAGI further helps the IRS to decide which taxpayers are eligible for these income-based tax provisions. 

To lower your MAGI, you must

• Contribute to retirement accounts such as the 401(k), Traditional IRA
• Make health savings account (HSA) contributions
• Claim business expenses if you are self-employed. 
• Deduct the student loan interest. 
• Make charitable donations.

In a nutshell, lowering your MAGI will increase your eligibility for the tax deductions and credits.