Calculation of Adjusted Gross Income

Step 1: Total Gross Income

Step 2: Adjustments (Deductions)

Common "above-the-line" deductions that reduce your gross income.

Your Estimated AGI:

Understanding Your Adjusted Gross Income (AGI)

Adjusted Gross Income (AGI) is a critical figure used by the IRS to determine your tax liability. It serves as the starting point for calculating your total tax bill and determines your eligibility for various tax credits and deductions.

How is AGI Calculated?

The calculation follows a specific sequence. First, you sum all sources of income (Gross Income). Then, you subtract specific "above-the-line" adjustments. The formula is:

AGI = Total Gross Income – Specific Adjustments

Gross Income vs. Adjusted Gross Income

Gross Income includes everything you earned during the year: wages, dividends, capital gains, business income, and even retirement distributions. Adjusted Gross Income is that total amount reduced by specific items like student loan interest or contributions to a health savings account (HSA). It is usually found on Line 11 of Form 1040.

Why AGI Matters

• Tax Bracket: It influences which tax bracket you fall into.
• Deduction Eligibility: Many deductions, like medical expenses, are limited based on a percentage of your AGI.
• Credits: Eligibility for the Child Tax Credit or the Earned Income Tax Credit is often based on this number.

Example Calculation

Suppose an individual has the following financial profile:

• Annual Salary: $55,000
• Interest Income: $200
• IRA Contribution: $5,000
• Student Loan Interest: $1,200

Total Gross Income: $55,200
Total Adjustments: $6,200 ($5,000 + $1,200)
Adjusted Gross Income: $49,000

function calculateAGI() { var wages = parseFloat(document.getElementById('wages').value) || 0; var interest = parseFloat(document.getElementById('interest').value) || 0; var otherIncome = parseFloat(document.getElementById('otherIncome').value) || 0; var studentLoan = parseFloat(document.getElementById('studentLoan').value) || 0; var hsa = parseFloat(document.getElementById('hsa').value) || 0; var ira = parseFloat(document.getElementById('ira').value) || 0; var educator = parseFloat(document.getElementById('educator').value) || 0; var totalGross = wages + interest + otherIncome; var totalAdjustments = studentLoan + hsa + ira + educator; var agi = totalGross – totalAdjustments; var resultArea = document.getElementById('resultArea'); var agiValue = document.getElementById('agiValue'); var breakdown = document.getElementById('breakdown'); agiValue.innerHTML = '$' + agi.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); breakdown.innerHTML = 'Gross Income ($' + totalGross.toLocaleString() + ') minus Adjustments ($' + totalAdjustments.toLocaleString() + ')'; resultArea.style.display = 'block'; resultArea.scrollIntoView({ behavior: 'smooth', block: 'nearest' }); }