MAGI Calculation

5 replies
45 views

Just to make sure, Federal and state withholding tax , EE Social security tax and EE Medicare tax do not affect MAGI numbers, correct ?...Please confirm….Thank you

catglassAnswer

Employee Tax Expert

Yes, that is correct. Federal withholding, state withholding, EE (Employee) Social Security tax, and EE Medicare tax do not reduce or affect your Modified Adjusted Gross Income (MAGI).

MAGI is calculated based on your gross taxable income before these payroll taxes are deducted.

DoninGA

Level 15

Correct. Federal income tax, state income tax, employee (EE) Social Security tax, and employee (EE) Medicare tax do not affect your Modified Adjusted Gross Income (MAGI).

MAGI is calculated starting from your Adjusted Gross Income (AGI), which is your gross income before any of these payroll or income taxes are deducted. Because these taxes are paid out of your income rather than deducted to determine your income, changes in your withholding or tax liabilities will not lower or raise your MAGI.

username1641636Author

Level 2

If I withdraw from my 401 k to fund my HSA, would this money affect my MAGI by increasing ?...Thank you

DoninGA

Level 15

Yes, withdrawing from a traditional 401(k) increases your Modified Adjusted Gross Income (MAGI) because the withdrawal counts as taxable income. While a qualifying Health Savings Account (HSA) contribution can reduce your AGI and MAGI, it does not cancel out the new taxable income from the 401(k) withdrawal.

How the Math Works

401(k) Withdrawal: Taking money out of a traditional 401(k) adds directly to your gross income and increases your Adjusted Gross Income (AGI) and MAGI.

HSA Contribution: Contributing to an HSA provides an "above-the-line" deduction that lowers your AGI and MAGI. However, the deduction is capped by annual IRS contribution limits ($4,400 for self-only or $8,750 for family in 2026).

Net Effect: Unless your 401(k) withdrawal is equal to or smaller than your allowed HSA contribution—and funded with separate cash rather than a direct rollover offset—your overall MAGI will increase. Directly using a 401(k) withdrawal to fund an HSA does not create a wash or tax-free transfer

catglass

Answer

Employee Tax Expert

Yes, that is correct. Federal withholding, state withholding, EE (Employee) Social Security tax, and EE Medicare tax do not reduce or affect your Modified Adjusted Gross Income (MAGI).

MAGI is calculated based on your gross taxable income before these payroll taxes are deducted.