What's the new MAGI formula under the new tax law?

[spncity]

If not interested, feel free to skip this thread.

So - with the new tax law, what is the "new" formula for a 2018 MAGI of, say, $25,000... ?

Since a consulting gig comes my way here and there, here's what I mean.

I used to know how much 1099 income I could earn, or when to turn work down so as not to earn too much, taking into consideration we would itemize... which included things like:
a Solo 401-k (employee portion, plus catch-up, plus employer portion),
HSAs maxed out,
property taxes of almost $6,000,
state income tax of 8%,
a few business expenses - maybe $3,000,
self-employment tax,
a $3,000 carry forward loss,
the personal exemptions,
MFJ....
(Charitable contributions were itemized, but added back in for MAGI).

Now I'm at a loss as to the new formula, as I want to try to back my way into "the figure" (meaning the gross income) but only have enough knowledge to frustrate me.

So - if there are any math-tax takers out there, take a stab at my new formula... if you care to. Or point me somewhere...?

[pb4uski]

I can't think of anything that changes AGI, which is the starting point for MAGI. YMMV.

[RunningBum]

I don't think there is a new formula.


A lot of those things don't count in the old formula--property taxes, state income tax, personal exemptions...no reason to believe they factor into the new formula.


I'm assuming MAGI remains the same. If anyone knows otherwise, please pitch in.

[spncity]

Sorry for confusion. I realize MAGI stays the same.

But now is it gross income minus $24,000 and that's MAGI? Or is it business net income minus $24,000 to arrive at MAGI?

The formula I'm looking for is a personal formula for my maximum 1099 income that can result in MAGI of $25,000.

[RunningBum]

What is this $24,000?

[SecondCor521]

Quote:

Originally Posted by spncity Sorry for confusion. I realize MAGI stays the same. But now is it gross income minus $24,000 and that's MAGI? Or is it business net income minus $24,000 to arrive at MAGI? The formula I'm looking for is a personal formula for my maximum 1099 income that can result in MAGI of $25,000.

Huh?

I think I see what you're after, and the best I can suggest is to start with your 2016 1040 and see what changes in the new tax bill affect you, if any.

But to the best of my recollection, AGI is at the very bottom of the front page of the 1040, and the standard deduction (I'm assuming that's what you mean with the $24,000) is at the top of the back page of the 1040. From that I conclude that you should completely ignore the $24K standard deduction (and in fact all the related deduction/exemption/child tax credit stuff) when trying to determine AGI, since all of that stuff affects taxable income and taxes owed, not MAGI.

Also, since when do charitable deductions have to be added back in to get to MAGI? I must have missed something there, or maybe it is one of the MAGIs I don't care about.

[pb4uski]

Since when do SALT, exemptions or charitable contributions affect MAGI?

Unless perhaps he is trying to calculate MAGI by working backwards from taxable income?

[spncity]

Yes. Getting there.

I'm afraid the title of the thread was worded badly.

Yes, I'm trying to work backwards. I want to end up with MAGI of $25,000. Trying to see what scenarios would work. Sole proprietorship/consulting.

If Solo 401k is maxxed, other business expenses are $11000, what is the max amount that can be earned (gross) that would end up (MFJ) at that MAGI. Once I get to that gross amount, I turn down work for the rest of the year.

Maybe someone can help me word the question.

Thanks in advance for comments.

[spncity]

It's my understanding that charitable contributions have to be added back to AGI to get MAGI. There are a couple of other things in that add-back category that I don't recall at the moment.

[SecondCor521]

Quote:

Originally Posted by spncity It's my understanding that charitable contributions have to be added back to AGI to get MAGI. There are a couple of other things in that add-back category that I don't recall at the moment.

Nope:

https://turbotax.intuit.com/tax-tips...axes/L7kHckNS3

[audreyh1]

Quote:

Originally Posted by spncity It's my understanding that charitable contributions have to be added back to AGI to get MAGI. There are a couple of other things in that add-back category that I don't recall at the moment.

Charitable deductions are taken on schedule A after the AGI is established. They reduce the taxes paid, but not the AGI. So no adding back in should be needed.

Quote:

Itemized deductions like mortgage interest, charitable contributions, medical expenses, etc. (or the standard deduction instead) are subtracted after AGI is calculated. They do not do not lower AGI and thus do not have an impact on MAGI.

from https://www.google.com/url?sa=t&rct=...890TI0DIUeeMJ0

Note that QCDs from IRAs and donation of appreciated stock are forms of charitable contributions that don't appear as income, so they help keep the AGI lower (as opposed to withdrawing from the IRA or selling the appreciated stock and then donating the proceeds, which would raise the AGI).

Other things that reduce the AGI are contributions to health savings accounts and qualified contributions to IRAs, 401Ks.

[SecondCor521]

Quote:

Originally Posted by spncity Yes. Getting there. I'm afraid the title of the thread was worded badly. Yes, I'm trying to work backwards. I want to end up with MAGI of $25,000. Trying to see what scenarios would work. Sole proprietorship/consulting. If Solo 401k is maxxed, other business expenses are $11000, what is the max amount that can be earned (gross) that would end up (MFJ) at that MAGI. Once I get to that gross amount, I turn down work for the rest of the year. Maybe someone can help me word the question. Thanks in advance for comments.

I get what you're trying to do, and again, I would recommend you start with your 2016 1040 and see what changes in the new tax bill might affect your situation.

Why do you want to have a MAGI of $25K? The only thing I know of at that MAGI level is auto zero EFC for FAFSA.

[pb4uski]

+1 Is the MAGI for Obamacare subsidies? Or for some other purpose? I mades a difference because there are different definitions of MAGI for different purposes.

[spncity]

Ah. Did not know there are different definitions for MAGI. That could cause some confusion. Yes, Obamacare. Also don’t know where I got the idea about charitable contributions.

[Livefree]

Is MAGI considered Taxable income? Looking at the top of my 1040 it listed Adjusted Gross Income which is one figure, and underneath, Taxable income which is a lot lower.

When I signed up for ACA I gave them projected income based on Adjusted not taxable..now i'm thinking that wasn't right?

[rbmrtn]

There is a MAGI defined for the ACA

Here is a summary http://laborcenter.berkeley.edu/pdf/..._summary13.pdf

and from healthcare.gov, https://www.healthcare.gov/income-an...mation/income/

[scrabbler1]

Quote:

Originally Posted by Livefree Is MAGI considered Taxable income? Looking at the top of my 1040 it listed Adjusted Gross Income which is one figure, and underneath, Taxable income which is a lot lower. When I signed up for ACA I gave them projected income based on Adjusted not taxable..now i'm thinking that wasn't right?

MAGI is not taxable income. It includes some income which is not taxable, such as tax-free income from muni bonds. If none of your income comes from the few extra items included in MAGI but not part of AGI, then your MAGI will be the same as AGI. I have some income from tax-free muni bonds, so when I signed up for the ACA I had to include it in my projected income for subsidy purposes. I never gave them taxable income because that figure is always irrelevant for ACA subsidy purposes.

[SecondCor521]

Quote:

Originally Posted by spncity Ah. Did not know there are different definitions for MAGI. That could cause some confusion. Yes, Obamacare. Also don’t know where I got the idea about charitable contributions.

OK. By the way, the Obamacare cliff is at 400% FPL. For a family size of 2 for 2018 coverage, that works out to $64,960. Above that amount, you lose your subsidy completely, and if you're middle-aged or older (or have high health insurance costs I guess), the loss of subsidy can be quite significant.

Below that number, you just lose part of your ACA subsidy, so it in effect works like an extra tax of maybe 10% to 15% of your income in that range.

There is one other number to be aware of and that is 250% of FPL, which for 2018 coverage is $40,600. If you project your income above that level when you sign up for the ACA, then you cannot get the additional CSR (Cost Sharing Reduction) subsidies.

So again, why is the $25,000 number significant to you?

[spncity]

It was starting place… a round number that I thought was realistic based on personal history. And then figured if I could get that figured out, maybe I can figure out myself how to back into the number for $64,000 in case more consulting requests come along.

[pb4uski]

Why can't you just calculate and estimate or range of MAGI assuming no consulting income and then the difference between that and $64,000 would be the amount of net consulting income that you could have.... the net being what you receive less expenses less any retirement contributions based on that income.