If you’re getting locked out of taking some deductions and retirement savings options, look at your MAGI – modified adjusted gross income.

MAGI is a little tweak on regular AGI (adjusted gross income), designed to keep high-earners from reaping certain tax advantages, mainly deductions for IRA contributions and student loan interest or Roth IRA contributions.

Who’s most likely to get hit by this lockout? Anyone who’s self-employed, whether it’s full-time or a side hustle, or paying for college. And if both of those describe your situation, it’s a good bet that your MAGI could work against you.

The calculation starts with your AGI, and then adds back a bunch of deductions:

  • Half of your self-employment tax
  • Qualified tuition expenses
  • Student loan interest
  • Tuition and fees deduction
  • IRA contributions
  • Passive or rental losses…

And a few other uncommon deductions.

Those add-backs hike up your MAGI, and could put you out of range of Roth contributions, deductible traditional IRA contributions, and the deduction for student loan interest.

Bottom line: A higher MAGI means a higher tax bill for you.