Impact of MAGI on US Expats' eligibility for tax saving provisions
Multiple tax-saving provisions included in One Big, Beautiful Bill are expected to save taxpayers thousands of dollars each filing season. Almost all of those provisions are limited by the taxpayers’ Modified Adjusted Gross Income (MAGI). The income limitation applies to the tax savings provision, from the largest $40K SALT tax deduction to the $6K Senior Bonus Tax Deduction.
Rare exclusion: Unlike most other deductions and tax credits, the above-the-line charitable deduction is not limited by or phased out based on your MAGI.
Social Security Disability Insurance (SSDI)
Social Security income includes retirement, survivor benefits, and disability payments. All Social Security income of tax filers is counted, regardless of whether it is taxable or not.
Non-taxable Social Security benefits (this includes Social Security Disability Insurance benefits (SSDI) are added back to AGI when calculating MAGI.
Supplemental Security Income (SSI)
SSI is not a Social Security benefit; it is a supplemental income program designed to help the elderly, the blind, or people with disabilities who have little or no income. SSI is always excluded from MAGI-based income. MAGI doesn't include Supplemental Security Income (SSI).
For the Senior Bonus Deduction specifically
MAGI calculations generally follow the same principles across different programs. MAGI is adjusted gross income (AGI) plus these, if any: untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest.
Bottom line
- SSDI (Social Security Disability Insurance) – Untaxable SSDI payments are added back to AGI to calculate MAGI
- SSI (Supplemental Security Income) – NO, SSI is never included in MAGI calculations
- Other disability payments – Like other untaxable income sources, disability payments are added back to calculate MAGI
Impact on US expats
Foreign Earned Income and MAGI
Foreign earned income that was excluded from your AGI is added back when calculating MAGI, which means it would affect eligibility for the senior bonus tax deduction and other tax-saving provisions.
More specifically, under section 911 of the Internal Revenue Code, American citizens and resident aliens living outside the US can exclude some earned income for tax purposes if they meet certain residency or physical presence tests. Any foreign income excluded under this section must be added back when calculating MAGI.
This means that if you're a senior who:
- Lives abroad and excludes foreign earned income under Section 911 (Foreign Earned Income Exclusion)
- Has that exclusion added back to your AGI to calculate MAGI
- Your MAGI exceeds the phase-out thresholds ($75,000 for single filers, $150,000 for joint filers)
Then your senior bonus deduction would be reduced or eliminated based on your higher MAGI amount.
Case study – when expat income eats your bonus
A 65-year-old single filer living in Spain reports:
| Item | Amount |
|---|---|
| Adjusted gross income after FEIE | $60,000 |
| Foreign earned income excluded (Form 2555) | $30,000 |
| MAGI ($60,000 + $30,000) | $90,000 |
MAGI exceeds the $75,000 threshold by $15,000.
The senior bonus shrinks by 6 cents multiplied by $15,000 = $900.
Resulting deduction: $6,000 – $900 = $5,100.
Even though her AGI looked modest, the add-back pushed MAGI high enough to shave 15% off the bonus – a cautionary tale for every retiree earning wages overseas.
NOTE! Foreign Tax Credit, regardless of the amount used to offset US tax, does not affect eligibility for Senior Bonus Deduction.
Max your savings – chat with TFX today
Smart MAGI planning means bigger tax breaks – especially for US expats. By understanding what counts toward MAGI, you can keep key deductions like the Senior Bonus and SALT break intact and unlock thousands in savings on your 2025 return.
Taxes for Expats specialises in US expat tax – so we can model your MAGI fast, blend FEIE, credits, and the new rules, and rescue every dollar you deserve. Book a free consultation now and let our CPAs turn the One Big Beautiful Bill into real savings on your next US return.
FAQ
No – excluded foreign income is added back to AGI when calculating MAGI, which may reduce or eliminate expat tax deductions like the Senior Bonus.
No – Supplemental Security Income (SSI) is always excluded from MAGI and won’t affect your eligibility for MAGI-based deductions.
Both taxable and non-taxable SSDI benefits are added back to AGI, increasing MAGI and potentially phasing out valuable tax savings.
No – the above-the-line charitable deduction is a rare exception that remains available regardless of your MAGI level.
