How is the 2025 Senior Deduct Magi calculated. What are the addons to the adjusted income. Is nontaxable Social Security benefits a addon?

[rjs]

Answered in your previous post of the same question.

[Katie-P · Accepted solution]

The 2025 Senior Deduction under the One Big Beautiful Bill allows up to a $6k deduction per taxpayer for taxpayers 65 or older by the end of 2025 (assuming the taxpayer has a valid social security number). 

The deduction has a phase out triggered once Modified Adjusted Gross Income (MAGI) exceeds $75k for a single taxpayer or $150k for married filing jointly taxpayers. 

Here's how to figure out if your income will be under the phase out trigger:

• Adjusted Gross Income (AGI) = total gross income from all sources less certain adjustments on Schedule 1 of Form 1040 (resource: Definition of adjusted gross income)
• Add back: Foreign Earned Income Exclusion
• Add back: Excluded income from U.S. territories

If the total is under $75k/$150k (single/married filing jointly), then you'll get the full deduction. 

Note that non-taxable Social Security benefits are not considered an add-on to your AGI when calculating your MAGI for the 2025 Senior Deduction. But the taxable portion of your Social Security benefits would be included. 

I hope this info is helpful! I'll stay tuned in case you have any follow-up questions. 

[KusyJ]

The term modified adjusted gross income in the new law is your adjusted gross income increased by any amount excluded from gross income under certain sections of the tax code that include foreign income. 

Your adjusted gross income may include any taxable portion of Social Security based on your tax situation. For example, if your Social Security benefits are not taxable based on your income, it is not accounted for in your adjusted gross income. 

Depending upon your income, some amount of your Social Security benefits will be taxable up to 85%. The taxable portion of your Social Security benefit is added into your adjusted gross income. If that adjusted gross income with any foreign income exclusions added back in will be compared to the $75,000 ($150,000 Married Filing Joint) phase-out level for the $6,000 personal exemption.

[smithbg1]

Thank you!  I have looked everywhere for how the MAGI is calculated and you're the ONLY one who has stated that MAGI does not include the non-taxable portion of Social Security.  

[Katie-P]

Glad I could help, @smithbg1! 

[Katie-P]

One more note, @smithbg1 - sometimes, MAGI does include the non-taxable portion of social security benefits, such as when calculating the Premium Tax Credit. For purposes of the Senior Tax Deduction, I can confirm that the non-taxable portion is thankfully excluded, per the bill section below:

“(iii) Limitation based on modified adjusted gross income.—“(I) In general.—In the case of any taxpayer for any taxable year, the $6,000 amount in clause (i) shall be reduced (but not below zero) by 6 percent of so much of the taxpayer’s modified adjusted gross income as exceeds $75,000 ($150,000 in the case of a joint return).“(II) Modified adjusted gross income.—For purposes of this clause, the term ‘modified adjusted gross income’ means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933."

Sections 911, 931 and 933 deal with the following, respectively:

• citizens or residents of the United States living abroad;
• income from sources withing Guam, American Samoa, or the Northern Mariana Islands; and
• income from sources within Puerto Rico.

Just wanted to make sure I clarified my answer to indicate that sometimes the MAGI calculation depends on what it is being calculated for. Thanks!

[AmeliesUncle]

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@smithbg1 wrote:

I have looked everywhere for how the MAGI is calculated and you're the ONLY one who has stated that MAGI does not include the non-taxable portion of Social Security.  

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There are MANY kinds of MAGI that are slightly different.  The original answer was in response to question about the new exemption that starts in 2025 for people age 65 and older.  If you are referring to MAGI for another purpose, you need to specify what you are referring to.

[Katie-P]

Yes, @AmeliesUncle, our minds were in sync! Thank you for clarifying, as well!

[smithbg1]

Yes, I was ONLY referring to the new 2025 tax deduction for $6,000.  The non-taxable portion of SS income would have taken me over 75K.  

[tgraly]

In your reply, you listed a number of add-ons. Are these those only ones? What about tax-exempt interest or qualified dividends below the tax threshold?

[NCperson]

@tgraly those are the only ones.  Look at SChedule 1a , Lines 1-3. 

https://www.irs.gov/pub/irs-dft/f1040s1a--dft.pdf

[user17648715753]

Are tax free dividends included in the MAGI calculation or are they excluded like in AGI?

[rjs]

@user17648715753 

Look at the definition of MAGI above. It starts with AGI. The only things that are added are the Foreign Earned Income Exclusion, Foreign Housing Exclusion or Deduction, and excluded income from sources in Puerto Rico, Guam, American Samoa, and the Northern Mariana Islands. Anything else that is not included in AGI will not be included in MAGI. For most people MAGI will be the same as AGI.

I'm not sure what you mean by "tax free dividends." There are no tax-free dividends on Form 1040 or Schedule B. Most dividends are taxable and are included in AGI. Are you referring to exempt-interest dividend in box 12 of a Form 1099-DIV? Those are reported as tax-exempt interest. They are not included in AGI and are not added in to the MAGI calculation for the deduction for seniors.

Note that MAGI is calculated differently for different purposes. There are over a dozen different definitions of MAGI, depending on what it's being used for. What we are discussing in this thread is MAGI for the deduction for seniors.