What Is Adjusted Gross Income?
You probably think of your income as the amount of money your employer pays you, but for tax purposes, it can be more complicated than that.
Adjusted gross income, or AGI, comes up a lot around tax season — but what does this term mean?
What Is Adjusted Gross Income?
Adjusted gross income is the total gross income amount minus certain adjustments. Gross income is the total amount of money you get in a year, including:
- Wages or salary
- Dividends and capital gains
- Business income
- Retirement distributions
- Other income
Adjusted gross income subtracts amounts for certain payments. Adjustments are allowed for:
- Educator expenses
- Student loan interest
- Alimony payments
- Retirement account contributions
AGI is never more than gross income. AGI is calculated as part of your income tax return, and it's the amount of income that the IRS considers taxable. Although this is your taxable income, it doesn't include standard or itemized deductions, so you probably won't pay taxes on the total amount.
The IRS uses it to determine your eligibility for certain deductions and retirement account contributions. Government agencies might also use AGI to decide whether you qualify for benefits and financial programs.
The IRS uses your previous year's AGI to verify your identity when you file a federal tax return. You may not remember last year's AGI, but it's not difficult to find.
Your AGI is on last year's tax return. In 2020, it was on Line 11 of Form 1040. These forms don't usually change much from year to year, but this line number could change in future years.
You have some options if you don't have a copy of last year's Form 1040 on hand. If you used a professional tax preparer, you can reach out to them for a copy of your 1040. You may also be able to access your AGI from your IRS.gov account, or you can request a tax transcript by mail. First-time filers over the age of 16 should simply enter zero for their previous year's AGI.
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