What your son is taxed on is Taxable Income. Taxable income starts with the Adjusted Gross Income and from this the Standard Deduction and Exemptions are subtracted to arrive at the Taxable Amount. the MAGI (Modified Adjusted Gross Income) is a different value. The calculation and its purposes are described below.
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. According to the IRS, your MAGI is your AGI with the addition of the following deductions, if applicable:
- Student loan interest
- One-half of self-employment tax
- Qualified tuition expenses
- Tuition and fees deduction
- Passive loss or passive income
- IRA contributions, taxable social security payments
- The exclusion for income from U.S. savings bonds
- The exclusion under 137 for adoption expenses
- Rental losses
- Any overall loss from a publicly traded partnership
MAGI effects on your taxes
Your MAGI is used as a basis for determining whether you qualify for certain tax deductions. One of the most notable is in determining whether or not your contributions to an individual retirement plan are deductible.
For example, as of 2016, if you were a single filer and covered by a retirement plan at work, you couldn't take an IRA deduction if you had an MAGI of $71,000 or higher. You also couldn't take a deduction for tuition and fees if you had an MAGI of $80,000 or higher as a single, or $160,000 if married and filing jointly.