How to Estimate Modified Adjusted Gross Income

Figure your taxes ahead of time.

No matter what you do for a living or how much money you make, it is a good idea to make tax planning a year-round activity. Waiting until April to prepare your taxes could leave you with an unpleasant surprise, and a tax bill you are unable to pay. Taking the time to estimate your modified adjusted gross income during the tax year allows you to prepare properly and budget for any taxes you might owe. Your modified gross income includes the deductions and allowances provided by the IRS, including your personal exemptions and retirement plan contributions.

Things You'll Need

• 1040 form
• W2 forms
• 1099 forms
• Pay stubs
• Bank and brokerage statements
• Tax preparation software

Instructions

1. Gather all of your income documents, including your W2 and 1099 forms if you have them. If you have not yet received these documents, you can estimate your wage, interest and dividend income by reviewing your pay stubs and bank and brokerage statements. Multiply the gross income on your most recent pay stub by the number of pay periods per year, and estimate your total interest and dividend income by multiplying your monthly earnings by 12.

2. Download a 1040 form from the IRS website, or use a tax preparation software package. Using tax software makes estimating your adjusted gross income easier, since the software does all the calculations for you. If you do not have access to tax software, you can compute your taxable income on paper using the 1040 form.

3. Complete each section of the 1040 form, just as you would if you were actually filling out your taxes. Gather all of your income documents and add up each category of income carefully. Double-check your math before transferring the figures to the 1040 form.

4. Enter the number of exemptions you are claiming in the Exemptions section of the 1040 form. Keep in mind that you need to supply a Social Security number for every child you claim as a dependent.

5. Report any adjustments you plan to take, including retirement account and health savings account contributions, in the Adjusted Gross Income section. Subtract those adjustments from your total income to get your adjusted gross income.

6. Go to the Taxes and Credits section and enter the number of exemptions you plan to claim. Use those deductions, and your itemized or standard deduction, to figure your taxable income.

References

• IRS Website: 1040 Form