1. What is Adjusted Gross Income (AGI)?

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

2. How to Calculate AGI from W2

The basic formula to calculate AGI from your W2 is:

Where:

• W2 Box 1 — Shows your taxable wages, tips, and other compensation
• Adjustments — Eligible deductions that reduce your taxable income (e.g., student loan interest, IRA contributions, educator expenses)

3. Importance of AGI

Details: Your AGI affects your tax bracket, eligibility for tax credits and deductions, and is used as the basis for calculating your taxable income. Many states also use AGI for state tax calculations.

4. Using the Calculator

Tips:

• Enter the amount from Box 1 of your W2 form
• Enter the total of all your eligible adjustments to income
• The calculator will compute your Adjusted Gross Income

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between gross income and AGI?
A: Gross income is all income you receive, while AGI is gross income minus specific adjustments allowed by the IRS.

Q2: Where can I find my W2 Box 1 amount?
A: Box 1 of your W2 form shows your taxable wages and compensation. Your employer provides this form annually.

Q3: What are common adjustments to income?
A: Common adjustments include educator expenses, student loan interest, IRA contributions, self-employment taxes, and alimony payments (for certain years).

Q4: Is AGI the same as taxable income?
A: No, taxable income is your AGI minus either the standard deduction or itemized deductions and any qualified business income deduction.

Q5: Why is my AGI important for next year's taxes?
A: Your previous year's AGI is often used to verify your identity when e-filing your tax return and may affect certain tax credits.