How to calculate adjusted monthly gross income



Adjusted gross income, or AGI, refers to your total income subject to tax, less a few specific deductions. The AGI is important because it is used to determine your ability for certain tax credits and deductions, as well as certain social programs. For some claims, eligibility is based on your adjusted gross monthly income, so here’s how to estimate yours.

First, determine your total annual income
The first number you need to know is your total annual income. If you’re earning an annual salary it’s easy, but be sure to include all the bonuses you expect to receive.

If you are an hourly employee, the easiest way to determine your annual income, assuming you work roughly the same number of hours in each pay period, is to look at one of your paychecks. Take your gross pay (before tax) and multiply that number by the number of pay periods per year.

If you get paid …

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Then add up your deductions
Once you know your annual gross income, the next step is to subtract your deductions. However, not all tax deductions are used to calculate the AGI – only a few. If you have any of the following, add them up to determine how much to deduct from your gross income.

  • Health Savings Account (CSH) contributions
  • Educator Expenses – If you teach full time in an elementary or secondary school, you can deduct up to $ 250 of unreimbursed expenses.
  • Eligible moving expenses – If you have moved a certain distance in order to start a new job, these expenses may be eligible for a deduction.
  • Retirement Account Contributions – Contributions to Qualified Retirement Accounts such as Traditional IRAs, SEP-IRAs, Individual 401 (k), and SINGLE IRAs are deductible when determining the AGI. Annual limits vary depending on the type of account.
  • Support payments you paid
  • Half of the self-employment tax
  • Tuition and Fees – If you qualify within the income limits, you can deduct up to $ 4,000 in eligible tuition and fees.
  • Student Loan Interest – Interest you paid on a qualifying student loan can reduce your AGI by up to $ 2,500.

Note: this list is not exhaustive. There are other AGI deductions, but these are some of the most common.

Once you have determined the deductions to which you are entitled, add the amounts to determine your total income “adjustment”.

Subtract deductions from total income and divide by 12
By subtracting your deductions from your total annual income, you get your annual adjusted gross income. By dividing this number by 12, you will get your monthly AGI.

It is important to note that for most people this calculated monthly AGI is only an estimate. Your actual monthly AGI may vary based on the number of hours worked, unexpected bonuses, and other factors, but the calculation detailed here is the most accurate way to estimate it.

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