Adjusted Gross Income (AGI) Calculator
Understanding Your Adjusted Gross Income (AGI)
Adjusted Gross Income (AGI) is a crucial figure on your tax return. It's your gross income minus certain specific deductions, often referred to as "above-the-line" deductions. AGI is not just a number; it's a foundational figure that impacts many aspects of your financial life, from determining your eligibility for certain tax credits and deductions to qualifying for various government benefits and even student financial aid.
What is Gross Income?
Gross income is your total income from all taxable sources before any deductions are made. This typically includes:
- Wages, salaries, and tips
- Business income (from self-employment or a business you own)
- Interest and dividends
- Capital gains
- Rental and royalty income
- Alimony received (for divorce agreements before 2019)
- Pension and annuity income
- Unemployment compensation
What are "Above-the-Line" Deductions?
These are specific deductions that you can subtract from your gross income to arrive at your AGI. They are called "above-the-line" because they are listed on the first page of Form 1040, above the line where AGI is calculated. Common above-the-line deductions include:
- IRA Contributions: Deductible contributions to a traditional Individual Retirement Arrangement (IRA).
- Student Loan Interest Paid: Interest paid on qualified student loans, up to a certain annual limit.
- Health Savings Account (HSA) Contributions: Contributions made to an HSA.
- Self-Employment Tax Deduction: If you're self-employed, you can deduct one-half of your self-employment taxes.
- Alimony Paid: For divorce or separation agreements executed before 2019, alimony payments are deductible by the payer.
- Educator expenses, certain business expenses of reservists, performing artists, and fee-basis government officials, and penalties for early withdrawal of savings are other examples.
Why is AGI Important?
Your AGI is critical because it serves as the basis for calculating many other tax-related items. For instance:
- Tax Credits: Eligibility for credits like the Child Tax Credit, Earned Income Tax Credit, and education credits often phases out at certain AGI levels.
- Itemized Deductions: Some itemized deductions, like medical expenses, are only deductible if they exceed a certain percentage of your AGI.
- Deductibility of IRA Contributions: Whether your traditional IRA contributions are deductible can depend on your AGI and if you're covered by a retirement plan at work.
- Medicare Premiums: Higher AGI can lead to higher Medicare Part B and Part D premiums.
- Investment Income Tax: The Net Investment Income Tax (NIIT) applies to certain individuals with AGI above specific thresholds.
How to Use the Calculator
Our Adjusted Gross Income Calculator helps you quickly estimate your AGI. Simply enter your total gross income and any applicable above-the-line deductions into the respective fields. The calculator will then subtract these deductions from your gross income to provide your estimated AGI.
Example Calculation:
Let's say you have:
- Total Gross Income: $75,000
- IRA Contributions: $6,500
- Student Loan Interest Paid: $1,500
- HSA Contributions: $3,000
- Self-Employment Tax Deduction: $0 (you are not self-employed)
- Alimony Paid: $0
Your total deductions would be $6,500 + $1,500 + $3,000 = $11,000.
Your Adjusted Gross Income (AGI) would be $75,000 – $11,000 = $64,000.
This calculator provides a helpful estimate, but always consult with a qualified tax professional or refer to official IRS guidelines for precise tax planning and filing.