By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.
To calculate your MAGI (modified adjusted gross income), start with the adjusted gross income on your Form 1040 (line 11a on the 2025 form), then add back the specific items the rule you are testing names. For most W-2 families with no foreign income, MAGI for the Roth IRA limit, the 3.8% Net Investment Income Tax, the Child Tax Credit and the SALT cap is simply AGI, so the real work is getting AGI right. MAGI does not subtract the standard deduction, itemized deductions or taxes paid.
For a household earning $750,000 to $1.2 million with RSUs, a MAGI calculator mostly confirms what you already suspect: you are past every phase-out. The useful part is knowing which paycheck choices move the number, and spotting the one year (a sabbatical, a parental leave, a job change) when it drops into a range where it matters again.
There is no single MAGI: each rule defines its own
“Modified AGI” is not one number on your return. Each tax provision writes its own definition, and they differ in what gets added back. The ones that touch a high-income family with kids:
| Rule (2026) | MAGI starts with AGI, then | Threshold that matters |
|---|---|---|
| Roth IRA contributions | Subtracts Roth conversion income; adds back traditional IRA deduction, student loan interest deduction, foreign earned income or housing exclusion, excluded savings bond interest, excluded employer adoption benefits | Phase-out $242,000 to $252,000 MFJ |
| Net Investment Income Tax (3.8%) | Adds back foreign earned income exclusion | $250,000 MFJ, $200,000 single (not indexed) |
| Child Tax Credit ($2,200 per child) | Adds back excluded foreign and territory income | Reduced above $400,000 MFJ; two children fully phased out at $488,000 |
| SALT deduction cap ($40,400) | Adds back excluded foreign income | Cap shrinks above $505,000 MFJ; reaches the $10,000 floor at about $606,333 |
| Medicare IRMAA (for you later, or your parents now) | Adds back tax-exempt interest; uses the return from two years earlier | Income brackets adjusted each year |
Sources: IRS Publication 590-A, Worksheet 2-1; IRS Net Investment Income Tax; Schedule 8812; P.L. 119-21, section 70120; SSA POMS HI 01101.010.
How to calculate MAGI step by step from your W-2s and 1099s
- Add up Box 1 wages from every W-2. Box 1 already includes RSU income at vest, bonuses and any ESPP ordinary income your employer reported. It already excludes pre-tax 401(k) deferrals, payroll health premiums and dependent care FSA money.
- Add taxable investment income. Taxable interest, ordinary dividends, and net capital gains from your 1099-B (including shares you sold after vest). Municipal bond interest is not included here.
- Add any other taxable income. K-1 income from a private fund or practice, rental income, Roth conversions, taxable IRA distributions.
- Subtract above-the-line adjustments. Directly made HSA contributions, a deductible traditional IRA contribution (rare at this income), self-employment items. The result is AGI.
- Apply the add-backs for the rule you are testing, using the table above. For a US-based W-2 family, MAGI usually equals AGI for every rule except IRMAA.
What never comes off: the standard deduction ($32,200 MFJ for 2026), mortgage interest, charitable gifts, California income tax, property tax and the tax withheld from your paycheck. All of these come after AGI, so none of them lower MAGI. We cover the standard deduction question in more depth in does the standard deduction reduce MAGI, and where to find each number on the form in which line is MAGI on Form 1040.
Worked example: a $960,000 Bay Area household with RSUs and two kids
Assumptions (illustrative, 2026, married filing jointly, California, children ages 4 and 7):
- Parent A, biotech director: $400,000 salary plus $300,000 of RSUs vesting during the year.
- Parent B, physician: $260,000 salary.
- Both defer the full $24,500 to pre-tax 401(k) plans ($49,000 total). Payroll health premiums $9,000. Dependent care FSA $7,500.
- Brokerage account: $14,000 of taxable interest and dividends, $36,000 of net long-term gains, $5,000 of California municipal bond interest.
| Line | Amount |
|---|---|
| Gross pay including RSU vests | $960,000 |
| Less pre-tax 401(k), health premiums, dependent care FSA | ($65,500) |
| Combined W-2 Box 1 wages | $894,500 |
| Plus taxable interest, dividends and capital gains | $50,000 |
| AGI | $944,500 |
| MAGI for Roth IRA, NIIT, Child Tax Credit, SALT cap | $944,500 |
| MAGI for IRMAA-style tests (adds $5,000 muni interest) | $949,500 |
What that number decides for this family in 2026:
- Roth IRA: far above $252,000, so no direct contribution. The route is a backdoor Roth, and possibly a mega backdoor Roth if the 401(k) plan allows after-tax contributions. See calculating MAGI for a Roth IRA.
- Net Investment Income Tax: the tax applies to the lesser of $50,000 of investment income or $694,500 of MAGI over $250,000. That is 3.8% of $50,000, or $1,900.
- Child Tax Credit: zero. Two children phase out completely at $488,000.
- SALT deduction: capped at $10,000, even though California income tax and property tax on their home are many times that.
Two things surprise people here. The $65,500 of pre-tax payroll choices lowered MAGI dollar for dollar, while their mortgage interest deduction, however large, did nothing to it. And the RSU vests, which many parents think of as “stock,” are ordinary wages for MAGI purposes the moment they vest.
Which choices actually move MAGI, and which do not
| Choice | Effect on MAGI |
|---|---|
| Pre-tax 401(k) or 403(b) deferral | Lowers it dollar for dollar (up to $24,500 for 2026). Catch-ups at 50+ must be Roth for 2026 if 2025 FICA wages from that employer exceeded $150,000, so for most of these families they do not lower it |
| Dependent care FSA, payroll health premiums | Lowers it (DCAP up to $7,500 per household for 2026) |
| HSA contributions (with an HSA-eligible plan) | Lowers federal MAGI (family limit $8,750 for 2026) |
| Roth 401(k) or after-tax contributions | No change |
| Mortgage interest, charity, state tax, standard deduction | No change |
| RSU vest | Raises it by the value at vest |
| Selling appreciated shares | Raises it by the gain |
| Harvesting capital losses | Offsets gains, plus up to $3,000 of other income per year (IRS Topic 409) |
| Roth conversion | Raises AGI; excluded for the Roth IRA test, counted for NIIT, SALT and IRMAA |
| Qualified Roth IRA withdrawal | No change (not taxable income) |
| Municipal bond interest | Not in AGI, but added back for IRMAA and the premium tax credit |
For a deeper list of what can legitimately bring MAGI down, see how to reduce modified adjusted gross income and are 401(k) contributions included in MAGI.
The year MAGI matters: a leave, a sabbatical or a smaller vest
In a normal year this family is so far past every threshold that small moves do not change any outcome. The calculation starts to matter when income dips, which happens more often than people plan for: one parent steps back while the kids are young, an RSU grant finishes vesting, or someone changes employers and loses a year of refreshers.
Say Parent B takes a year off and Parent A’s vests are smaller, and MAGI lands at $540,000. The 2026 SALT cap then shrinks by 30% of the amount over $505,000: $40,400 minus 30% of $35,000 equals $29,900. That is $19,900 more deduction than the $10,000 floor. At a 32% federal bracket, that can be worth roughly $6,400 in federal tax for a family that itemizes.
Inside the $505,000 to $606,333 band, each extra $1,000 of MAGI removes $300 of SALT deduction. At 32%, that adds about $96 of tax per $1,000 on top of the regular rate. That is the moment to decide whether to sell a concentrated position, do a Roth conversion, or push a bonus into January, and the answer depends on the whole year, not one line.
California and Washington: what changes, and what does not
MAGI is a federal concept, and the thresholds above are the same wherever you live. What differs is the state bill on the same income. California taxes wages, RSU vests and capital gains at the same rates, up to 13.3%: the 12.3% top bracket, which starts at $1,485,906 of taxable income for joint filers, plus a 1% tax on taxable income over $1,000,000 (2025 rate schedule, FTB), and withholds 1.3% SDI on all wages with no cap for 2026 (EDD). There is no lower rate for long-term gains.
Washington has no tax on wages for 2026, but taxes long-term capital gains above an annual standard deduction ($278,000 for 2025, the latest published) at 7%, rising to 9.9% on taxable gains above $1,000,000 (WA DOR). From January 1, 2028, Washington adds a 9.9% income tax for filers with AGI over $1,000,000 (WA DOR). An Amazon or Microsoft household near $1 million of AGI will want to know which side of that line a large vest or sale puts them on. Details of the income definition are still pending state guidance.
Common mistakes when using a MAGI calculator
- Entering gross pay instead of Box 1 wages. This overstates MAGI by every pre-tax payroll deduction.
- Leaving out RSU income. It is on the W-2, not a 1099, and it counts in full.
- Subtracting the standard or itemized deduction. That gives taxable income, not MAGI.
- Using this year’s number for Medicare premiums. IRMAA looks back two years, so a retired parent’s big 2026 sale can raise their 2028 premiums.
- Assuming a married filing separately return helps. For the Roth IRA test, spouses who lived together at any time in the year face a $0 to $10,000 phase-out range.
What to write down for your kids
Your children will not remember a MAGI worksheet. They may remember why you maxed the 401(k) every year, why you sold vested shares instead of holding them, and why you chose a backdoor Roth. A one-paragraph note each spring, saved alongside the return, turns a tax calculation into a decision they can read at 16. Conversations fade. Documentation compounds.
Frequently asked questions
Does MAGI include the standard deduction?
No. MAGI starts from adjusted gross income, and the standard deduction is subtracted after AGI to reach taxable income. Taking the standard deduction ($32,200 MFJ for 2026) or itemizing makes no difference to MAGI. The same is true for mortgage interest, charitable gifts and state taxes. Only above-the-line items such as pre-tax retirement deferrals and HSA contributions reduce it.
Do Roth distributions count toward MAGI?
Qualified Roth IRA and Roth 401(k) withdrawals are not taxable, so they are not in AGI or MAGI. A nonqualified withdrawal of earnings can be taxable and would raise AGI. A Roth conversion is different: the converted amount is taxable income, and although it is removed for the Roth IRA contribution test, it counts for NIIT, the SALT cap and IRMAA.
Does IRMAA use AGI or MAGI?
MAGI. For Medicare premium surcharges, Social Security defines MAGI as AGI plus tax-exempt interest, and it usually uses the tax return from two years before the premium year. So 2026 premiums generally reflect 2024 income. This matters now if you help with a parent’s planning, and later for your own retirement sale and conversion timing.
Does MAGI include taxes paid?
Taxes you pay do not reduce MAGI. Federal and state income tax withheld from wages or RSU vests is still part of Box 1 wages. State and property taxes are an itemized deduction, which comes after AGI. The only payroll items that reduce MAGI are pre-tax benefit elections such as a traditional 401(k), health premiums and a dependent care FSA.
Next step
Pull last year’s W-2s and your 1099-B and run the five steps above, then compare the result with the phase-out table. If a lower-income year is coming, that is the time to plan sales and conversions around it. If you want a second set of eyes on the numbers, the Age Five Family Office™ offers a short Tax & Wealth Assessment, and our tax management and equity compensation pages explain how we work with families. This is general education, and the right move depends on your family’s full picture.
Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.
Connect on LinkedIn → · About KevinThis is part of how we approach Tax Management for high-income W-2 families at Bright Advisers.
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