Please DO NOT direct me to ANY of Turbo Tax information, because it is either incorrect or ridiculously circular. The IRS calculates MAGI differently for different purposes (e.g., Trad IRA contribution compared with ACA APTC subsidies). I'm looking for how the MAGI is calculated to find out how much of a Trad IRA contribution is deductible for self-employed individuals if you also have a SEP-IRA (which is considered an employer "workplace" plan even if sole prop). The deduction is phased out if the MAGI is > $83,000. Turbo Tax gives infuriatingly useless information such as:
"MAGI is AGI with certain deductions added back such as IRA and self-employed retirement plan contributions" which is ONLY true for other MAGIs. In an answer about this exact topic, TT also states that SE individuals can increase their Trad IRA deductions by reducing the MAGI by reducing the AGI by CONTRIBTING to IRAs...WTF TT?
Question: How is the MAGI (for IRA deduction limits, Not ANY OTHER purpose) calculated for SE individuals who also contribute to a SEP-IRA? What is added back to the AGI? Half of the SE tax AND the SEP-IRA contribution or JUST 50% of the SE tax?
Thank you for bearing with me...and please, no cut and paste from other TT answers — they are all referring to the wrong type of MAGI. Thanks in advance.
Thanks for the reply.... that is indeed relevant but it is how to calculate the MAGI on that page that is the question
Not sure how to respond to individual answers here... help?
@SE_in_SoCal wrote:
Not sure how to respond to individual answers here... help?
You can just type an "@" and then the username. For example, @SE_in_SoCal
THAT IS IT! Finally! Thank you so much.... I hope this will also be helpful to others in the community: (adding it as an FYI:
Enter your adjusted gross income (AGI) from Form 1040, 1040-SR, or Form 1040-NR,
line 11, figured without taking into account the amount from Schedule 1 (Form 1040),
line 20
2. Enter any student loan interest deduction from Schedule 1 (Form 1040), line 21
3. Enter any foreign earned income exclusion and/or housing exclusion from Form 2555,
line 45
4. Enter any foreign housing deduction from Form 2555, line 50
5. Enter any excludable savings bond interest from Form 8815
6. Enter any excluded employer-provided adoption benefits from Form 8839
7. Add lines 1 through 6. This is your modified AGI for traditional IRA purposes
Some additional details related to your original question:
AGI is not a factor in determining your permissible SEP-IRA contribution or self-employed retirement deduction. However, a permissible SEP-IRA contribution reduces your MAGI for the purpose of being able to deduct a regular traditional IRA contribution, but it also means that you are contributing to a workplace retirement plan which makes this MAGI relevant if it was not already so due to participating in some other employer's plan. As you found from the definition of MAGI for the purpose of being able to deduct a traditional IRA contribution, MAGI is determined without any potential deduction for a traditional IRA contribution, so there is no circular definition of this MAGI.