The AGI calculation depends on the tax return form you use; some forms allow you to take more adjustments to income, than others.
Key Takeaways
• Your total income includes your wages, income from self-employment, taxable interest and dividends, alimony income, recognized capital gains, rental income, and other income payments.
• Your AGI is your total income minus certain eligible “adjustments to income,” including qualified student loan interest payments and deductible contributions to your IRA accounts.
• Your AGI often determines your eligibility for many tax credits and deductions. Typically, the lower your AGI, the greater the deductions and credits you’ll be eligible to receive.
Determining your AGI
When you file a tax return, you will see a line to determine your adjusted gross income, or AGI, before arriving at your taxable income number. The AGI calculation depends on the additional schedules and adjustments you use.
Reporting gross total income
Your AGI will never be more than the total income you report on your tax return, and in many cases, it will actually be less. Total income includes all of your income that is subject to income tax. This typically includes:
- Your wages from work reported on a Form W-2
- Income from self-employment, which is usually calculated on Schedule C
- Taxable Social Security benefits, pensions and annuities, and IRA distributions
- Taxable interest and dividends
- Taxable alimony payments you receive from a former spouse
- Capital gains
- Rental income
- Any other income you receive that isn’t specifically exempted from income tax
Deductions for AGI
Throughout your tax return form, there are many opportunities to take deductions, some of which reduce your total income to determine AGI, and some that are taken in later parts of the return to reduce your taxable income.
The deductions you take to calculate AGI are referred to as “adjustments to income.” These are specific deductions that the IRS allows you to use to reduce your total income to arrive at your AGI. You’ll sometimes hear these referred to as “above the line” deductions.
Some examples of adjustments to income include:
Deducting your eligible adjustments from your total income results in your AGI.
TurboTax Tip: Your modified adjusted gross income, or MAGI, is your AGI increased or decreased by certain amounts that are unique to specific deductions. Your MAGI is used to determine your eligibility for certain deductions.
Significance of AGI
The amount of your AGI directly influences your eligibility to claim many of the deductions and credits available on your tax return. If you itemize deductions and report medical expenses, for example, you have to reduce the total expense by 7.5% of your AGI.
- So, if you report $10,000 in medical expenses and an AGI of $100,000; you'll need to reduce your deduction by $7,500.
- But, if your AGI is $50,000, the reduction is only $3,750.
Generally speaking, the lower your AGI, the greater the deductions and credits you’ll be eligible to receive.
Modified Adjusted Gross Income (MAGI)
Throughout your return you’ll notice that the IRS also uses modified adjusted gross income, or MAGI. Your MAGI is your AGI increased or decreased by certain amounts that are unique to specific deductions.
For example, you'll need to calculate your MAGI if you want to deduct some of your student loan interest payments. For this deduction, your MAGI will be your AGI plus certain exclusions and deductions you’ve claimed for residency outside of the United States, such as the foreign earned income exclusion.
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FAQs
The AGI calculation is relatively straightforward. It is equal to the total income you report that's subject to income tax—such as earnings from your job, self-employment, dividends and interest from a bank account—minus specific deductions, or “adjustments” that you're eligible to take.
How do I figure out my AGI? ›
You can determine your AGI by calculating your annual income from wages and other income sources (gross income), then subtracting certain types of payments, such as student loan interest, alimony, retirement contributions, or health savings account contributions, you've made during the year.
How can I find my AGI from last year? ›
On your prior-year tax return, your AGI is on line 8b of the Form 1040. If you are using the same tax preparation software that you used last year, that software will likely have your prior-year tax return for you to access.
How do I find my AGI on my W2? ›
You can't find AGI on W-2 Forms. You'll calculate your adjusted gross income (AGI) on Form 1040. Your AGI includes amounts from your W-2. However, it isn't based solely on those amounts.
What is the AGI limit for adjusted gross income? ›
Tax Year 2021
| Children or Relatives Claimed | Maximum AGI (filing as Single, Head of Household, Widowed or Married Filing Separately*) | Maximum AGI (filing as Married Filing Jointly) |
|---|
| Zero | $21,430 | $27,380 |
| One | $42,158 | $48,108 |
| Two | $47,915 | $53,865 |
| Three | $51,464 | $57,414 |
Mar 15, 2024
Note: You can't get your AGI over the phone. You can find your AGI in your online account or on last year's tax return – request a copy.
How do I calculate my modified adjusted gross income? ›
Your MAGI (modified adjusted gross income) is your AGI plus certain deductions you must “add back.” These deductions include IRA contributions, student loan interest, one-half of self-employment tax, qualified tuition expenses, and more.
Can you find your AGI online? ›
If you do not have a copy of your tax return, you can get your AGI from one of the IRS self-service tools: Use your online account to immediately view your AGI on the Tax Records tab. If you're a new user, have your photo identification ready. Use Get Transcript by Mail.
What is the AGI on the 1040? ›
Your total (or “gross”) income for the tax year, minus certain adjustments you're allowed to take. Adjustments include deductions for conventional IRA contributions, student loan interest, and more. Adjusted gross income appears on IRS Form 1040, line 11.
How do you calculate AGI from paystub? ›
First, calculate gross income by adding together wages, tips, and taxable distributions. Next, deduct the other payments, contributions, and expenses from gross income to calculate AGI.
Box 1 shows the amount of gross taxable wages an employer paid. These wages include prizes, bonuses, fringe benefits, and salaries. This part of Form W-2 does not include amounts given to retirement plans or other payroll deductions.
Is AGI the same as taxable income? ›
Taxable income is a layman's term that refers to your adjusted gross income (AGI) minus any itemized deductions you're entitled to claim or the standard deduction according to your tax filing status (e.g., single, married filing jointly, or head of household).
How do I calculate my AGI? ›
How to calculate adjusted gross income (AGI)? The AGI calculation is relatively straightforward. Using the income tax calculator, simply add all forms of income together, and subtract any tax deductions from that amount. Depending on your tax situation, your AGI can even be zero or negative.
How to find your AGI from last year? ›
You can find your AGI on the form you used to file your last year's return. Various versions of Form 1040 reflect the AGI amount on different lines: Line 11 on Form 1040, 1040-SR and 1040-NR (2020 through 2023 tax years) Line 8b on Form 1040 and 1040-SR (2019 tax year)
What is an example of adjusted gross income? ›
To boil it down, it's simply your total gross income minus specific tax deductions. Some common examples of eligible deductions that reduce adjusted gross income include deductible traditional IRA contributions, health savings account contributions, and educator expenses.
Can I file without my AGI? ›
If you lack the previous year's AGI, don't fret. Simply enter $0 as your prior-year AGI on line 38 of Form 1040 or line 21 of Form 1040-SR. This is an acceptable workaround provided by the IRS when you can't access your prior-year tax return.
Where to find AGI on IRS transcript? ›
Here is a sample IRS transcript. On this sample, adjusted gross income is the seventh (and eighth) line on page 3 of 6 pages. It is also the last line under Adjustments to Income.
How do you calculate your gross income? ›
Alternatively, you can calculate your gross income as (1) your monthly salary before taxes or (2) the number of hours you will work in a given month multiplied by your hourly pay rate.
