2022 IRA Guide to MAGI (Modified Adjusted Gross Income)

Written by Ricky Nave in Individual Finance

The IRS uses several different measures of income for different purposes. “Gross income” refers to the sum of your wages, dividends, capital gains, business income, retirement account distributions/withdrawals, and any other sources of income. Gross income is used as the basic starting point for the IRS. “Adjusted gross income” (AGI) is equal to gross income minus any income-deductible adjustments which can come from expenses such as student loan interest, alimony payments, or certain contributions to a retirement account. AGI is used to help the IRS determine how much income tax you owe in a given year. However, the income measure that most affects retirement accounts is “modified adjusted gross income” (MAGI), but what is MAGI and how does it affect your IRA options?

To calculate MAGI (modified adjusted gross income), start with your AGI and then add back certain adjustments such as student loan interest, half of SE tax, and rental losses. The IRS uses MAGI thresholds to determine whether you qualify to contribute to a Roth IRA and whether you can deduct contributions to a traditional IRA if you have a 401(k).

You can find more comprehensive information on IRS rules for IRA contributions and MAGI limits in publication 590a.

Traditional IRAs

If you don’t have a workplace retirement plan such as a 401(k), then you can deduct your traditional IRA contributions regardless of how high your income is. However, if you or your spouse have a workplace retirement plan, then you can only deduct traditional IRA contributions if you fall into certain MAGI brackets.

What are the MAGI brackets for traditional IRAs in 2022?

For a single individual or head of household with MAGI less than $68k or for a married couple filing a joint tax return with MAGI under $109k, contributions to a traditional IRA are completely tax-deductible even if you or your spouse have a workplace retirement plan such as a 401(k).

In addition, for single individuals or heads of household with MAGI between $68k and $78k, or for couples filing jointly with MAGI between $109k and $129k, contributions to a traditional IRA are partly tax-deductible, with the deductible percentage decreasing through the specified MAGI range, even if that person or their spouse has a workplace retirement plan.

Roth IRAs

What are the MAGI brackets for Roth IRA contributions in 2022?

The default Roth IRA contribution limit applies to any single individual or head of household with MAGI less than $129k, or to any married couple filing jointly with MAGI less than $204k. The single filer contribution limit phases out for MAGI between $129k and $144k while the couple contribution limit phases out for MAGI between $204k and $214k.

Ricky Nave

In college, Ricky studied physics & math, won a prestigious research competition hosted by Oak Ridge National Laboratory, started several small businesses including an energy chewing gum business and a computer repair business, and graduated with a thesis in algebraic topology. After graduating, Ricky attended grad school at Duke University in the mathematics PhD program where he worked on quantum algorithms & non-Euclidean geometry models for flexible proteins. He also worked in cybersecurity at Los Alamos during this time before eventually dropping out of grad school to join a startup working on formal semantic modeling for legal documents. Finally, he left that startup to start his own in the finance & crypto space. Now, he helps entrepreneurs pay less capital gains tax.

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