how to calculate adjusted gross income
if you use software to prepare your tax return it will calculate your agi after you ve input your income numbers if you calculate it yourself you ll tally your total reported income for the year that might include job income as reported to the irs by your employer on a w 2 form plus other income such as dividends self employment income and miscellaneous income reported on 1099 forms 6next add any taxable income from other sources such as profit on the sale of a property unemployment compensation pensions social security payments and ira contributions many of these items are also listed on irs schedule 1 5the next step is to subtract the adjustments that apply to you the resulting figure is your agi then to determine your taxable income subtract either the standard deduction or your total itemized deductions from your agi 7the standard deduction for tax returns for married couples filing jointly is 29 200 for the 2024 tax year or 14 600 for single filers 8 taxpayers whose itemized deductions exceed that amount would generally opt to itemize while others would take the standard deduction the irs provides a list of itemized deductions and the requirements for claiming them on its website 7 your agi also affects your eligibility for many of these deductions and tax credits the lower your agi the more significant the number of deductions and credits you ll generally be eligible to claim and the more you ll be able to reduce your tax bill an example of agi affecting deductionslet s say you had some significant dental expenses during the year that weren t reimbursed by insurance and you ve decided to itemize your deductions you re allowed to claim an itemized deduction for the portion of those expenses that exceed 7 5 of your agi 9this means that you can deduct the amount that exceeds 7 500 or 4 500 if you report 12 000 in unreimbursed dental expenses and have an agi of 100 000 but the 7 5 reduction is just 3 750 if your agi is 50 000 and you d be entitled to deduct a larger amount 8 250 in this case adjusted gross income agi vs modified adjusted gross income magi some tax calculations and government programs are based on your modified adjusted gross income or magi this figure starts with your agi then it adds back certain items such as any deductions you take for student loan interest or tuition and fees 10your magi determines how much if anything you can contribute to a roth individual retirement account roth ira in any given year pre tax contributions to traditional 401 k funds help to reduce your agi and magi taxable income roth ira contributions are made with after tax dollars and won t further reduce your agi or magi it s also used to calculate your income if you apply for marketplace health insurance under the affordable care act aca 3many people with relatively uncomplicated financial lives find that their agi and magi are the same if you file electronically the irs form will ask you for your previous year s agi as a way of verifying your identity 11adjusted gross income vs gross income vs taxable incomeyour gross income is all the money you ve earned in a year that isn t exempt from taxation this income can be in the form of salary wages self employment income interest dividends or capital gains your adjusted gross income is that amount minus certain qualified expenses and adjustments you then subtract either the standard deduction or the total of your itemized deductions for the year you can t take both itemized deductions and the standard deduction the result is your taxable income 7you report your agi on line 11 of irs form 1040 the form you use to file your income taxes for the year 6keep that number handy after completing your taxes because you ll need it again if you e file your taxes next year the irs uses it as a way to verify your identity 11