This is one of the best overall explanations I've come across looking for this information. I hope you have a video more in depth about the MAGI relating to the ACA Premium Tax Credit (PTC), especially an updated one as the ACA legislation has been amended several times since 2020, and may be changed again with the current (May 2023) debt ceiling agreement.
Thanks! The MAGI for ACA credits is still the same. What's changed is how much credit people may be eligible for based on their MAGI. I did a detailed video on ACA credits before, but I think it may have been before the 4x federal poverty level limit was temporarily lifted. TBD what changes, if any, come out of the debt ceiling talks. But if there are changes, maybe I'll do another video on it!
Thank you, very helpful video! For Roth IRA Contribution Eligibility, to check eligibility to contribute in 2024, do you use estimated MAGI for 2024 or 2023 actual tax return? Thanks again.
2024 contribution eligibility is based on 2024 MAGI. So you’ll have to estimate. Or, you can wait until early 2025 to make your 2024 contribution (you have up until you file your 2024 taxes to make your 2024 contribution. And by then, you should know your MAGI exactly since you’ll be able to prep your return)
How do you calculate AGI manually when you might not want to refer to last years tax return to capture that number, since you must be predictive into the next year?
It's nearly impossible to project current year AGI with complete accuracy. If your only source of income is wages and you know precisely how much those will be, then it's pretty easy. But if you are self-employed and have inconsistent income, if have a bank account that pays interest, if you have a taxable brokerage account (especially containing actively-managed mutual funds) you may have dividend and capital gain income, if you have a rental property, etc., it will be close to impossible to nail down an exact AGI figure. The best you can do is look at last years, and then look at each item of income that went into it, and try to figure out how each of those specific lines of income may be different this year. That will help you come up with a reasonable estimation of projected AGI.
Hey Andy, can you put a link to the Roth Contribution Limits (2020 and 2021) video you mentioned at the end of this video? I went to your channel, but I couldn't seem to find it.
@@memypencil1 Try it again; I just made it public. I forgot I had made it private (because the info was from 2020 and 2021, so the specific income figures referenced in there are outdated)
Is it safe to say that the only real "deduction" one gets towards calculating MAGI for ROTH CONTRIBUTIONS is Traditional IRA/401k contributions? (aside from lines 5-10 @ 2:54). So HEALTHCARE BENEFIT premiums are NOT deductible when determining MAGI towards ROTH CONTRIBUTIONS, correct? I have seen that listed elsewhere so was confused on if healthcare plan premiums were also deductible here.
Check out Form 1040 Schedule 1 and you can see all of the other deductions that are still applicable in this MAGI. Specifically regarding healthcare premium deductions, how do you normally deduct them: 1) are you self-employed and you deduct them on Schedule 1, 2) are you employed and you deduct them by having the premiums taken out of your wages on a pre-tax basis or 3) do you deduct them on Schedule A as an itemized deduction????
@@RetirementPlanningEducation #2 (Employed and deducted from wages). So I guess that means they are already removed from the wages I am reporting on Line 1 of 1040? In essence not included in MAGI totals?
Sort of, but no. What's special about those withdrawals was simply the ability to stretch realization of taxation out over three years. For example, if you took a $30k distribution in 2020, you were able to show it as only $10k of income on your tax return for 2020. And then another $10k in 2021 and another $10k in 2022. So, the full $30k would not have been counted against you for IRMAA purposes on your 2020 income, even though you received the full $30k distribution in that year. Only $10k of income would count against you for your 2020 income. And then another $10k each of the next two years. So, those special "Coronavirus Related Distributions" aren't exempt from IRMAA. But they at least spread out the hit to your income over a few years, as opposed to jamming it all into one year.
Depends what MAGI you’re referring to, and whether you mean at the federal or state level. At the federal level, most likely. At the state level, it depends. For example, in my state of NJ, such contributions will NOT lower gross income on the NJ income tax return.
I assume the income limits to Roth Ira are set on a federal level. I still want to contribute but may not be able to in 2025 due to income limits. So I thought contributing to my 457 b will help reduce my magi
@@bryangodinez2142 Ah, got it. Yes, for purposes of being eligible to contribute to a Roth IRA, that's a federal thing. And yes, making pretax contributions to a 457b will reduce the amount of wages shown in box 1 of your W2, and that's the box that flows into gross wages (and ultimately becomes part of MAGI) on your federal tax return
@@RetirementPlanningEducation Clarifying the above point. So, 403b, 457 and 401k contributions will lower MAGI for purposes of contributing to a (non-deductible) Roth IRA. Do I have that correct ?
I was just looking for the IRMAA MAGI and this is the clearest explanation I have found so far, so thank you. Keep up the good work.
I like this video. Your explanation is straight forward and simple. Subscribed.
thank you!
This is one of the best overall explanations I've come across looking for this information. I hope you have a video more in depth about the MAGI relating to the ACA Premium Tax Credit (PTC), especially an updated one as the ACA legislation has been amended several times since 2020, and may be changed again with the current (May 2023) debt ceiling agreement.
Thanks! The MAGI for ACA credits is still the same. What's changed is how much credit people may be eligible for based on their MAGI. I did a detailed video on ACA credits before, but I think it may have been before the 4x federal poverty level limit was temporarily lifted. TBD what changes, if any, come out of the debt ceiling talks. But if there are changes, maybe I'll do another video on it!
Helpful. Thank you.
That was extremely helpful.
Thank you!
Thank you,
best video on magi🎉
Thank you!
Thank you, very helpful video! For Roth IRA Contribution Eligibility, to check eligibility to contribute in 2024, do you use estimated MAGI for 2024 or 2023 actual tax return? Thanks again.
2024 contribution eligibility is based on 2024 MAGI. So you’ll have to estimate. Or, you can wait until early 2025 to make your 2024 contribution (you have up until you file your 2024 taxes to make your 2024 contribution. And by then, you should know your MAGI exactly since you’ll be able to prep your return)
How do you calculate AGI manually when you might not want to refer to last years tax return to capture that number, since you must be predictive into the next year?
It's nearly impossible to project current year AGI with complete accuracy. If your only source of income is wages and you know precisely how much those will be, then it's pretty easy. But if you are self-employed and have inconsistent income, if have a bank account that pays interest, if you have a taxable brokerage account (especially containing actively-managed mutual funds) you may have dividend and capital gain income, if you have a rental property, etc., it will be close to impossible to nail down an exact AGI figure. The best you can do is look at last years, and then look at each item of income that went into it, and try to figure out how each of those specific lines of income may be different this year. That will help you come up with a reasonable estimation of projected AGI.
Hey Andy, can you put a link to the Roth Contribution Limits (2020 and 2021) video you mentioned at the end of this video? I went to your channel, but I couldn't seem to find it.
ua-cam.com/video/ba51tbJMbjQ/v-deo.html
Thanks, Andy! Unfortunately, when I click on the link I get a "Video unavailable
, This video is private" error message.
@@memypencil1 Try it again; I just made it public. I forgot I had made it private (because the info was from 2020 and 2021, so the specific income figures referenced in there are outdated)
Hi Andy, I can see the video now. Thank you so much!
Is it safe to say that the only real "deduction" one gets towards calculating MAGI for ROTH CONTRIBUTIONS is Traditional IRA/401k contributions? (aside from lines 5-10 @ 2:54). So HEALTHCARE BENEFIT premiums are NOT deductible when determining MAGI towards ROTH CONTRIBUTIONS, correct? I have seen that listed elsewhere so was confused on if healthcare plan premiums were also deductible here.
Check out Form 1040 Schedule 1 and you can see all of the other deductions that are still applicable in this MAGI.
Specifically regarding healthcare premium deductions, how do you normally deduct them: 1) are you self-employed and you deduct them on Schedule 1, 2) are you employed and you deduct them by having the premiums taken out of your wages on a pre-tax basis or 3) do you deduct them on Schedule A as an itemized deduction????
@@RetirementPlanningEducation #2 (Employed and deducted from wages). So I guess that means they are already removed from the wages I am reporting on Line 1 of 1040? In essence not included in MAGI totals?
@@straitjacketstudios correct
Do the cov19 cares Act 401k withdrawals qualify for a life changing event For the IRMAA? Thanks
Sort of, but no. What's special about those withdrawals was simply the ability to stretch realization of taxation out over three years.
For example, if you took a $30k distribution in 2020, you were able to show it as only $10k of income on your tax return for 2020. And then another $10k in 2021 and another $10k in 2022.
So, the full $30k would not have been counted against you for IRMAA purposes on your 2020 income, even though you received the full $30k distribution in that year. Only $10k of income would count against you for your 2020 income. And then another $10k each of the next two years.
So, those special "Coronavirus Related Distributions" aren't exempt from IRMAA. But they at least spread out the hit to your income over a few years, as opposed to jamming it all into one year.
at 4:08 you went over Medicare magi. doesnt RMD from IRA have to be declared?
Yes, taxable distributions from IRAs are included in AGI, which is included in MAGI used for Medicare surcharge purposes.
Hi, will contributing to a 457 b with pretax dollars reduce my MAGI?
Depends what MAGI you’re referring to, and whether you mean at the federal or state level. At the federal level, most likely. At the state level, it depends. For example, in my state of NJ, such contributions will NOT lower gross income on the NJ income tax return.
I assume the income limits to Roth Ira are set on a federal level. I still want to contribute but may not be able to in 2025 due to income limits. So I thought contributing to my 457 b will help reduce my magi
@@bryangodinez2142 Ah, got it. Yes, for purposes of being eligible to contribute to a Roth IRA, that's a federal thing. And yes, making pretax contributions to a 457b will reduce the amount of wages shown in box 1 of your W2, and that's the box that flows into gross wages (and ultimately becomes part of MAGI) on your federal tax return
@@RetirementPlanningEducation Clarifying the above point. So, 403b, 457 and 401k contributions will lower MAGI for purposes of contributing to a (non-deductible) Roth IRA. Do I have that correct ?