I earned too much to qualify for earned income credit. can I qualify for it if I contribute to my IRA?

[MichaelL1 · Accepted solution]

Doing an IRA contribution may lower the tax bill but will not change the numbers in qualifying for Earned Income tax credit.   

See detail below as the IRA contrbution is added back to the income on the return to get the  Modified Adjusted Gross Income (MAGI) For Earned Income Credit.

Your Modified Adjusted Gross Income (MAGI) For Earned Income Credit differs from your AGI in that it may be higher, with certain adjustments added back. (These are the same adjustments that were previously subtracted from your income to arrive at your AGI.) For example, the alimony payments that were subtracted from your income for AGI purposes must be added back to calculate your MAGI.

Some items that can increase your MAGI include the following:

• Tuition-related costs and deductions
• IRA contributions

[Larry A]

The issue is that both your AGI and your earned income must not be over the threshold. Contributing to an IRA does lower your AGI but it doesn't lower your earned income.

[MichaelL1]

MAGI calculation

To calculate your modified adjusted gross income, take your AGI and "add-back" certain deductions. Many of these deductions are rare, so it's possible your AGI and MAGI can be identical. Different credit and deductions can have differing add-backs for your MAGI calculation. According to the IRS, your MAGI is your AGI with the addition of the appropriate deductions, potentially including:

• Student loan interest
• One-half of self-employment tax
• Qualified tuition expenses
• Tuition and fees deduction
• Passive loss or passive income
• IRA contributions
• Non-taxable social security payments
• The exclusion for income from U.S. savings bonds
• Foreign earned income exclusion
• Foreign housing exclusion or deduction
• The exclusion under 137 for adoption expenses
• Rental losses
• Any overall loss from a publicly traded partnership