Referring to answer above, neither IRA worksheet helps user compute MAGI. I believe TurboTax's MAGI computation to determine an individual's Roth eligibility is inaccurate because it does not include tax exempt nor municipal bond interest.
Per the IRS instructions the worksheet in the program is working properly ... tax exempt and municipal bond interest income is not mentioned anywhere ...
How Much Can Be Contributed? Publication 590-A (2022), Contributions to Individual Retirement Arrangements (IRAs) | Internal Reve...
The contribution limit for Roth IRAs generally depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs.
Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes
Use this worksheet to figure your modified adjusted gross income for Roth IRA purposes.
|1.||Enter your adjusted gross income from Form 1040, 1040-SR, or 1040-NR, line 11||1.||_____|
|2.||Enter any income resulting from the conversion of an IRA (other than a Roth IRA) to a Roth IRA (included on Form 1040, 1040-SR, or 1040-NR, line 4b) and a rollover from a qualified retirement plan to a Roth IRA (included on Form 1040, 1040-SR, or 1040-NR, line 5b)||2.||_____|
|3.||Subtract line 2 from line 1||3.||_____|
|4.||Enter any traditional IRA deduction from Schedule 1 (Form 1040), line 20||4.||_____|
|5.||Enter any student loan interest deduction from Schedule 1 (Form 1040), line 21||5.||_____|
|6.||Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45||6.||_____|
|7.||Enter any foreign housing deduction from Form 2555, line 50||7.||_____|
|8.||Enter any excludable qualified savings bond interest from Form 8815, line 14||8.||_____|
|9.||Enter any excluded employer-provided adoption benefits from Form 8839, line 28||9.||_____|
|10.||Add the amounts on lines 3 through 9||10.||_____|
|Is the amount on line 10 more than the amount on line 11?|
If “Yes,” see the Note below.
If “No,” the amount on line 10 is your modified adjusted gross income for Roth IRA purposes.
|Note. If the amount on line 10 is more than the amount on line 11 and you have other income or loss items, such as social security income or passive activity losses, that are subject to AGI-based phaseouts, you can refigure your AGI solely for the purpose of figuring your modified AGI for Roth IRA purposes. (If you receive social security benefits, use Worksheet 1 in Appendix B to refigure your AGI.) Then, go to line 3 above in this Worksheet 2-1 to refigure your modified AGI. If you don’t have other income or loss items subject to AGI-based phaseouts, your modified adjusted gross income for Roth IRA purposes is the amount on line 10 above.|
The actual IRS worksheet for MAGI used for ROTH Contributions is on worksheet 2-1:
From what I can see in that IRS worksheet, the MAGI does not include tax-exempt income from Municipal bonds (line 2a on the form 1040). A bunch of other stuff can affect it though.
Other alternate MAGI's, for other purposes, do include tax-exempt interest/dividends, but apparently not this one, unless I'm missing something.
- Your adjusted gross income on your federal tax return
- Excluded foreign income
- Nontaxable Social Security benefits (including tier 1 railroad retirement benefits)
- Tax-exempt interest
- MAGI does not include Supplemental Security Income (SSI)
Schwab also has an article that cites MAGI includes municipal bond interest.
Not Always Tax-Free: 7 Municipal Bond Tax Traps
SteamTrain is correct, tax exempt income is not added to AGI when calculating the MAGI for the purpose of a Roth IRA contribution. SteamTrain provided the link to the worksheet for calculation the MAGI for the purpose of a Roth IRA contribution.
The MAGI from Healthcare.gov is for the purpose of determining Premium Tax Credits and has nothing to do with Roth IRA contributions. There are dozens of different ways to modify AGI for different purposes.
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