Adjusted Gross Income Calculator
Use our AGI calculator to calculate your adjusted gross income.
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How to Calculate Adjusted Gross Income
Adjusted gross income (AGI) is the total income you earn from things like wages, salaries, investments, and self-employment, minus specific deductions, called above-the-line deductions or adjustments to income.
Your adjusted gross income is the starting point for determining your taxable income and eligibility for certain deductions and tax credits. Because of this, calculating your AGI is an essential step when filing your taxes in the U.S.
You can use the following formula to calculate your adjusted gross income:
AGI = gross income – deductions – adjustments + passive income
Thus, you can calculate your adjusted gross income in a few easy steps.
Step One: Calculate Your Gross Annual Income
The first step in calculating your AGI is to calculate your gross annual income. Your gross income is the income you received throughout the tax year from wages, salaries, tips, dividends, interest income, rental income, business income, and any other form of taxable income.
To calculate your gross annual income, determine how much income you have received from each of these sources, then add it all together. The result is your gross income, or income before taxes and deductions.
Step Two: Subtract Above-the-Line Deductions
Once you know your gross annual income, you can subtract above-the-line deductions. Above-the-line deductions are also referred to as adjustments to income.
One advantage to these deductions is that you can claim them even if you do not itemize your deductions. Common above-the-line deductions include contributions to retirement accounts (i.e. IRA or 401k), self-employed health insurance premiums, student loan interest, alimony, and educator expenses.
By subtracting these deductions from your gross annual income, you reduce your taxable income, but there are still a few more steps to calculating your AGI.
Step Three: Determine Adjustments
After you subtract above-the-line deductions, you need to consider adjustments that are specifically related to AGI. These adjustments are different from above-the-line deductions.
Some examples of AGI-specific adjustments are deductible contributions to health savings accounts (HSAs), the deductible portion of self-employment tax, contributions to self-employed retirement plans, tuition for school, and educator expenses.
By accounting for these adjustments to your annual income, you reduce your taxable income even further. The result after accounting for these adjustments to your income is your adjusted gross income.
What is Modified Adjusted Gross Income?
Modified adjusted gross income (MAGI) is a little different from adjusted gross income. It is used to determine your eligibility for certain tax deductions, credits, and other financial benefits.
MAGI is essentially your AGI with some additional adjustments, such as tax-exempt interest, deductible contributions, excluded income from certain sources, passive income or losses, social security benefits, or education expenses.
Learn more on our modified adjusted gross income calculator.
Understanding how to calculate your AGI and MAGI is essential to accurately file your taxes and determine your eligibility for various tax benefits. With a clear understanding of your AGI, you’ll be better prepared to manage your taxes and make informed financial decisions.
It’s important to note that different tax forms and programs may have slight variations in how they calculate AGI, so you’ll need to review the specific guidelines and requirements for each when filing.
While it is possible to calculate AGI on your own, we strongly recommend working with a financial professional to ensure your calculations are accurate.
Frequently Asked Questions
How is AGI different from gross income?
Gross income is income before taxes and adjustments, whereas adjusted gross income (AGI) is income minus specific deductions, called above-the-line deductions or adjustments to income.
Why is AGI important?
Your AGI is what determines your taxable income at the end of the year and determines if you are eligible for certain deductions or tax credits. It is an essential metric when filing your taxes each year.
Can your AGI be negative?
Your AGI can be negative, which means that your exemptions and deductions exceed your income for the year.
When this happens, AGI is reported as $0 on your federal tax returns and that would mean you do not owe any taxes for that year. In fact, you would receive a full refund of any federal taxes you had already paid.