1. What is Adjusted Gross Income (AGI)?

Adjusted Gross Income (AGI) is your total gross income minus specific adjustments. It's an important number used to determine your taxable income and eligibility for certain tax credits and deductions.

2. How AGI is Calculated

The basic formula for AGI is:

Where:

• Gross Income - Includes wages, dividends, capital gains, business income, retirement distributions, and other income
• Adjustments - Includes items like educator expenses, student loan interest, alimony payments (for older agreements), contributions to retirement accounts, and self-employment taxes

3. Importance of AGI

Details: Your AGI determines your eligibility for many tax deductions and credits. It's used to calculate your taxable income and can affect things like:

• Eligibility for Roth IRA contributions
• Student loan interest deduction
• Education tax credits
• Medical expense deductions
• Charitable contribution deductions

4. Using the Calculator

Tips:

• Enter your total gross income from all sources
• Enter the sum of all your eligible adjustments
• The calculator will compute your AGI
• Consult a tax professional for complex situations

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between gross income and AGI?
A: Gross income is your total income before any deductions. AGI is your gross income minus specific adjustments.

Q2: Where can I find my AGI on my tax return?
A: For Form 1040, your AGI appears on line 11 (2022 tax year).

Q3: What are common adjustments to income?
A: Common adjustments include educator expenses, IRA contributions, student loan interest, and self-employment taxes.

Q4: Does AGI include standard deduction?
A: No, AGI is calculated before applying either the standard deduction or itemized deductions.

Q5: Why is AGI important for tax credits?
A: Many tax credits have AGI phase-out ranges that reduce or eliminate the credit as your AGI increases.