Adjusted Gross Income (AGI) is your gross income – which includes salaries, dividends, alimony, capital gains, business income, retirement distributions, and other income – minus some payments you have made during the year, such as student loan interest or contributions to a classic individual retirement account or a health savings account.
Adjusted gross income is equal to gross income less some income adjustments. Gross income includes money from jobs, investments and other sources.
In general, the formula for calculating adjusted gross income is:
or your tax preparer will calculate your adjusted gross income as part of your tax return preparation process.
You can find your adjusted gross income directly on your . On your 2020 federal income tax return, your AGI is on line 11 of your Form 1040. On your 2019 federal income tax return, your AGI is on line 8b of your Form 1040.
Your AGI is often the starting point for . From there, you’ll make various adjustments and subtract your allowable deductions to find the amount you’ll pay tax on: that’s your . You will see the term “Adjusted Gross Income (AGI)” repeated throughout your tax forms.
The AGI is the basis on which you may be eligible for many . For example, you may be able to , but only when they represent more than 7.5% of your AGI. So the lower your AGI, the larger the deduction.
Your state income tax return can also use your federal AGI as a starting point. If you , your software will calculate your AGI.
According to the IRS, for most taxpayers, the MAGI is simply the adjusted gross income (AGI) before subtracting deductible interest from student loans.
If you complete Form 1040 and itemize so that you can make certain deductions, you may need to calculate your MAGI. It can also be used as a benchmark to determine the level of phasing out of certain credits and tax saving strategies, and sometimes the MAGI formula may depend on the type of tax benefit to which it applies.