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As I understand it, Adjusted Gross Income (AGI) is the gross income minus a number of deductions. Modified AGI (MAGI) is that number with some of the deductions added back in.

Is the set of deductions added back in to the MAGI strictly a subset of the deductions applied to AGI?

Can either of these numbers, for any reason, ever exceed the original gross income?

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    What is your definition of "original gross income"? Total income as computed on Line 22 of Form 1040? Something else? Sep 7, 2015 at 3:08
  • I think so? I'm not actually sure. It seems to include all income pre-deductions though?
    – arcyqwerty
    Sep 8, 2015 at 3:49

1 Answer 1

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I can come up with a case.

Line 22 of form 1040 is the first line where you add up your income, and this is called "total income". However, some of the lines that sum into this can be reported as losses (negative numbers) in the total income: rows 12, 13, 14, 17, 18, and 21.

Keep an eye on 17 (rental income/loss) and 21 (other income)

Line 37/38 is the AGI calculation. This is line 22 with 0 or positive values subtracted. Line 37 is always less than or equal to Line 22, so:

Short story: "AGI" is always less than or equal to "total income".

Form 8582 introduces MAGI on line 7, referring to instructions to calculate. Most of the exclusions are from row 23-36 (the positive numbers subtracted from AGI). However, it also excludes rental losses, which could be a negative number (from row 17) added into row 22. There is something of a race condition in whether or not the real estate losses can actually be claimed (depending on if you qualify as a so-called "active participant", if the losses are less than $25,000 and if the MAGI as calculated is greater than $100,000, with a series of prorating calculations to determine the allowable loss.

Nevertheless, Form 8582, line 7 (modified adjusted gross income) can be greater than 1040, line 22 (total income) if there is a loss in 1040, line 17 (real estate income/loss).

Short story: If you have a large rental income loss, you could have MAGI greater than "total income".

As a bonus consideration, Form 6251, line 28 introduces "alternative minimum taxable income" as a sum. This calculation starts from the AGI, and adds back to total income certain expenses that could have been included in Schedule C or Schedule E (part of the total in 1040, line 12 or 17), and certain categories of other income in form 1040, line 21. So by adding back in certain expenses, it's possible that alternative minimum taxable income exceeds total income from 1040, line 22.

Short story: if you are a mining or petroleum explorer, had a large quantity of investment expenses, had a partnership that reported a loss, or otherwise had specific types of expenses, you may find you have an "alternative minimum taxable income" greater than "total income"

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