How to Determine AGI
Adjusted gross income (AGI) is the portion of your income that remains after you subtract allowable deductions from your total income on your Form 1040 tax return. It is an intermediary figure that is used to provide a basis for calculating your taxable income and to determine your tax bracket. It also is used to determine your eligibility for certain tax credits and for limiting certain deductions -- charitable contributions, for example, cannot exceed 50 percent of your AGI.
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Instructions
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1
Determine your total income. This includes wages, salaries, tips, investment income, self-employment income, pensions, alimony, Social Security income, unemployment benefits and even gambling winnings. You do not have to report cash gifts from U.S. sources. Your employment income should appear on Form W-2 submitted to you by your employer.
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2
Determine what expenses you may deduct from among those listed in the section entitled "Adjusted Gross Income" on Form 1040. These are your allowable deductions and include moving expenses, health insurance, 50 percent of self-employment tax, tuition expenses and student loan interest. You can claim these deductions even if you don't itemize your deductions -- you don't have to choose between deducting these expenses and taking the standard deduction.
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Gather together as many documents as you can to establish the expenses you are deducting -- receipts or canceled checks, for example. You don't have to file them with the Internal Revenue Service, but they will ensure accuracy and protect you in case of an IRS audit.
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Sum your allowable deductions, and subtract this sum from your total income to arrive at your AGI.
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Tips & Warnings
To arrive at taxable income, you subtract either your standard deduction or your itemized deductions from your AGI.
If, before the end of the tax year, you anticipate ending up just above the minimum AGI for a high tax bracket, deliberately increasing your expenses for allowable deductions might result in a net savings.
If you don't trust your arithmetic, use an online AGI calculator (see References).
