Circular dependency involving IRA deduction
I am not able to resolve the following circular dependency. In order to get Adjusted Gross Income (AGI) one needs to subtract an "IRA Deduction" from Gross Income. Modified AGI must then be computed as a function of AGI, in order to determine the IRA Deduction. What am I missing here?
Note: I am referring to this article: www.thebalance.com/how-to-calculate-your-modified-adjusted-gross-income-4047216. Virtually every article one can find online introduces this circular dependency. I realize that I could dig through the official forms, but I was hoping some expert on here could directly point me to what I am misunderstanding.
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According to the link you posted, the Modified Adjusted Gross Income (MAGI) is equal to the AGI plus some things that you subtracted, like Individual Retirement Account (IRA) contributions. So you actually don't need to calculate your AGI to get the MAGI. However, if you already know your AGI, you can calculate the MAGI from it.
So you have at least two options:
Use the Internal Revenue Service instructions to calculate the MAGI, which do not rely on calculating the AGI first.
Calculate the AGI without the IRA contribution (or pretend that your IRA contribution is 0). Then use that to calculate the MAGI (again, assuming that your IRA contribution is 0). Once you use the MAGI to determine your IRA contribution, subtract it from your original AGI value to get the real AGI value. The MAGI won't change.
Either way tends to result in you doing a number of the AGI calculations twice. The first one does this because it does many of the same calculations to get the MAGI as the AGI. The second actually does calculate the AGI twice. Although if you're careful, you can just adjust the first value to get the real value.
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