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What is MAGI, Modified Adjusted Gross Income

what is modified adjusted gross income magi

Real estate losses are subject to a phaseout limit under the material participation exclusion. The phaseout is based on an individuals MAGI, or Modified Adjusted Gross Income.

An individuals MAGI is used as a basis for determining whether they qualify for certain tax deductions.

Modified Adjusted Gross Income is determined without taking into account the following:

  • Taxable social security benefits or equivalent tier 1 railroad retirement benefits.
  • Deductible contributions to an IRA or certain other qualified retirement plans.
  • The exclusion allowed for qualified U.S. savings bonds interest used to pay higher educational expenses.
  • The exclusion allowed for employer-provided adoption benefits.
  • Any passive activity income or loss.
  • Any passive income or loss for real

    estate professionals.

  • Any overall loss from a publicly traded partnership.
  • The deduction for one-half of self-employment tax.
  • The deduction allowed for interest on student loans.
  • The deduction for qualified tuition and related expenses.

Rental Real Estate Loss Allowance of up to $25,000

If you or your spouse actively participated in a passive rental activity, you can deduct up to $25,000 of loss from the activity from your regular nonpassive income such as wages. The allowance is phased out if your modified adjusted gross income (MAGI) is between $100,000 and $150,000.

This special allowance is an exception to the general rule disallowing loses in excess of income from passive activities.

Phaseout of the Allowance

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