Don't Mess With Taxes

Photo by Jonathan Meyer on Unsplash

My favorite Christmas carol is "We Three Kings."

As most know, especially the youngsters who donned paper crowns to play Christmas pageant rulers traversing afar, the song tells the tale of the biblical Magi in Matthew 2:1-12.

John H. Hopkins, Jr. wrote the song around 1857. It was part of the United Methodist Hymnal, which was part of my childhood.

As a youngster, I was fascinated by these three travelers, often referred to (though not in the carol) as the Magi. It was the first time this West Texas desert dweller had heard of a moor. And, of course, I had to know more about the exotic gifts of frankincense and myrrh they were bringing to baby Jesus.

Literary Magi: When I got older, the trio of gift givers were referenced in one of my favorite short stories, O. Henry's "The Gift of the Magi." You can read (or re-read) it yourself, or listen to a reading of it by Audie Cornish, now a CNN correspondent, from when she was with NPR. It's at the 27 minute, 30 second mark of Tinsel Tales 3, originally airing in December 2014.

I won't spoil O. Henry's trademark twist that captures the Christmas spirit. But I will share his assessment of giving and getting: "Of all who give and receive gifts, such as they are the most wise. Everywhere they are the wise ones. They are the magi."

Tax MAGI, too: With my love of the seasonal giving spirit, as well as the lyrical wise men, when I began my tax journalism trek, which has also taken me afar, I was delighted to discover the acronym MAGI.

The abbreviation has nothing to do with the Christmas story or subsequent song. But it is about what, as O. Henry's classic romantic Christmas tale reminds us, is required to buy gifts: money.

When it comes to tax terms, money typically is referred to as income.

And MAGI is specifically an earner's modified adjusted gross income.

Here's the official definition of it from the ol' blog's tax glossary:

Modified adjusted gross income (MAGI) — This figure is calculated by starting with your adjusted gross income (AGI) and then adding back certain amounts you previously subtracted to get to your MAGI. The precise deductions you have to reconsider usually depend on the tax benefit that uses your MAGI. For example, it's your MAGI, not your AGI, that determines whether you can open or contribute to a Roth IRA. MAGI also affects eligibility for many educational and child-related tax breaks, as well as taxability of Social Security benefits. In each case, how MAGI is figured might be different, so read the instructions carefully.

MAGIcal Christmas wishes: With the three Magi references in this post — the trio of biblical wise men, the short story title, and the tax acronym — I couldn't resist on this Sunday Christmas Eve making 3 the week's By the Numbers figure.

I know it's not much, but please accept this holiday-themed Christmas Eve post as my tiny tax-related gift to you.

I hope it helps a bit if you encounter MAGI in the filing of your return or the calculating of a tax benefit. I also home you enjoy the associated Magi tidbits, stories, and song.

Most of all, regardless of what or how you celebrate this time of year, peace and goodwill to all, during this season and year-round!

And for those who observe the Christian holiday, here's wishing you and yours a Very MAGIcal and Merry Christmas!

Texas nativity: The hubby and I have our own nativity scene (that's it below) which, of course, has a Texas flavor reflecting our Lone Star State roots. 

There's the large silver star, sunset photo of the view from our front deck, as well as some small locally crafted clay pots (for frankincense and myrrh, perhaps?).

But our crèche's star (sorry, baby Jesus) is the Mexican folk-art armadillo, who joins the more traditional animals that shared the barn with baby Jesus, Mary, Joseph, the Angel, and the Three Wise Men bearing gifts.

You also might find these earlier Christmas-themed tax posts of interest:

• Real vs. Fake: Christmas tree (and tax) considerations
• Mele Kalikimaka: Singing the praises of tax-favored retirement savings
• Financial gifts (featuring We Three Kings) now can reduce estate taxes later

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