What Is Adjusted Gross Income?


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Adjusted Gross Income, or AGI, is the total amount of money your household earns in a given year minus any adjustments or deductions allowed by the Internal Revenue Service (IRS). Your AGI is the base number used to calculate all of your federal, state, and local taxes. It's important to understand your AGI and how it affects your taxes so you can make sure you are paying the right amount of taxes.

What is Included in Adjusted Gross Income?

Your AGI includes all sources of income, such as wages and salaries, interest, dividends, alimony, rental income, and retirement income. It also includes any pre-tax contributions you make to your employer-sponsored retirement plan, such as a 401(k) or 403(b). Capital gains from investments, such as stocks and mutual funds, are also included in your AGI.

What is Not Included in Adjusted Gross Income?

Not all sources of income are included in your AGI. Some of the income you may receive during the year, such as Social Security benefits, welfare payments, and tax-exempt interest income, is not included in your AGI. Additionally, any contributions you make to a traditional IRA or Roth IRA, as well as any money you contribute to a Health Savings Account (HSA) are not included in your AGI.

What Are the Benefits of Knowing Your Adjusted Gross Income?

Knowing your AGI is important for a number of reasons. It can help you determine if you qualify for certain tax deductions and credits and help you estimate how much you will owe in taxes. It can also help you decide if it makes sense to itemize your deductions or take the standard deduction. Knowing your AGI can also help you determine if you are eligible for certain government programs, such as Medicaid or SNAP (Supplemental Nutrition Assistance Program).

How Do I Calculate My Adjusted Gross Income?

Calculating your AGI is relatively easy. Begin by gathering all of your income documents, such as your W-2s, 1099s, and any other documents showing income earned during the year. Next, subtract any adjustments or deductions you are allowed to take, such as student loan interest, moving expenses, or alimony paid. Once you have all of your income and deductions, add them together to get your total adjusted gross income.

What is the Difference Between Adjusted Gross Income and Gross Income?

Gross income is the total amount of money you earn in a given year before any deductions or adjustments are taken. This is often referred to as your pre-tax income. Adjusted gross income (AGI) is the amount of money you earn in a given year minus any adjustments or deductions allowed by the IRS. Your AGI is the base number used to calculate all of your federal, state, and local taxes.

How Can I Lower My Adjusted Gross Income?

There are several ways to lower your AGI and reduce your tax bill. Contributing to a traditional IRA or Roth IRA can reduce your AGI by the amount you contribute. Making pre-tax contributions to employer-sponsored retirement plans, such as a 401(k) or 403(b), can also reduce your AGI. Additionally, making charitable donations or taking advantage of certain tax credits can help reduce your AGI and lower your taxes.

What Are the Implications of a High Adjusted Gross Income?

If your AGI is higher than the median income for your filing status, you may be subject to higher taxes. For example, if your AGI is higher than the threshold for the highest tax bracket, you will be taxed at a higher rate. Additionally, some deductions and credits may no longer be available to you if your AGI is too high.

What is the Difference Between Adjusted Gross Income and Adjusted Gross Margin?

Adjusted Gross Income (AGI) is the total amount of money your household earns in a given year minus any adjustments or deductions allowed by the IRS. Adjusted Gross Margin is the percentage of your income that you keep after taxes. It is calculated by dividing your AGI by your gross income. For example, if your AGI is $50,000 and your gross income is $60,000, your adjusted gross margin would be 83%.


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