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Level 5
posted Feb 4, 2025 12:05:58 AM

Trad IRA / MAGI / Numbers go up

I was trying on my married filing jointly returned to put 2500 into a trad IRA to lower my tax burden.

 

Then I advanced 2 or 3 screens after entering 2500 as a traditional IRA and presto!  My numbers went UP from 1003/571 to 1803/772 instead of down!

 

Can someone explain this MAGI for me?

 

And will buying a trad IRA for my husband lower our tax burden?  He only made 30k this year.

 

See attached screenshots!

0 2 683
2 Replies
Level 5
Feb 4, 2025 12:09:45 AM

Expert Alumni
Feb 5, 2025 8:18:33 AM

Yes. Your modified adjusted gross income (MAGI) is your adjusted gross income with some adjustments added back. It determines whether you qualify for certain deductions, credits and other tax benefits, and how much you qualify for. MAGI is calculated differently for each benefit.

 

Some examples of adjustments that are added back are, 

 

  • IRA contributions
  • Student loan interest – Form 1040, Schedule 1, line 21
  • Foreign earned income and housing exclusions - Form 2555, line 45
  • Foreign housing deduction or income exclusion - Form 2555, line 50
  • Savings bond interest excluded from your income - Form 8815, line 14
  • Adoption benefits excluded from your income - Form 8839, line 28
  • non-taxable social security.

Your husband may have a Traditional IRA, that is tax-deductible, as long as he is not covered by a retirement plan at work. If he is, this will not lower your tax burden because the of the combined MAGI amounts.

 

 

MAGI EXPLAINED

 

Retirement Plans Explained