Knowing how to calculate AGI is great but for people who don’t know anything about it, this blog will take you into the nitty-gritty.
What is Adjusted Gross Income (AGI)?
Adjusted Gross Income aka AGI is nothing but your total/gross income achieved after required deductions. IRS utilizes AGI for determining the income you owe for tax-paying this year.
In other words, AGI is the sum of your yearly earnings including dividends, wages, rental income, royalties, and more. By calculating everything that counts as your revenue, AGI defines the total amount
for which you’re liable for tax payment.
What Does AGI Include?
AGI is calculated using your gross income minus the ‘adjustments to income.’ The way you calculate your AGI directly impacts tax deductions & your eligibility for retirement plan contributions.
How is the Adjusted Gross Income Calculated?
Most people now rely on online tools for calculating AGI. You’ll only have to enter your income for the year & the deductions to be made and your AGI will be up in minutes. To your surprise, your AGI may be zero or negative too.
What is Adjusted Gross Income 2020?
If you want to refer to Adjusted Gross Income 2020, you may find it marked on line 11 of your Form 1040 as per IRS draft forms.
How to Use the AGI Calculator?
Using the AGI calculator is a 4-step process. You’ll have to follow these steps:
1. Choose your tax-filing status
2. Enter amounts for all eligible income
3. Enter amounts for all eligible deductions
4. Click on ‘Calculate’ & that’s all!
AGI Deductions
When you’re concerned with AGI deductions, you should know what ‘Deductions for AGI’ &‘Deductions from AGI’ mean.
Firstly, deductions for AGI can be claimed even if the taxpayer doesn’t itemize. Finding these deductions help in identifying certain amounts of itemized deductions.
Secondly, deductions from AGI must provide tax benefits by exceeding the standard deduction amounts.
It is also known as the ‘below the line’ deduction.
How do I Calculate my AGI and Taxable Income?
Here is how you can calculate your AGI & taxable income most easily:
1. Begin with your gross/total income. Refer lines 7-22 of Form 1040 for ‘Income.’
2. Sum all the amounts as mentioned & you’ll get your total income.
3. Deduct your adjustments (aka above-the-line deductions) from your total income.
4. Finally, you have your AGI
Many of you may have confused with above-the-line deductions. Well, you can consider the following as adjustments for calculating AGI:
✓ IRA deductions
✓ Paid alimonies
✓ Job expenses for performing artists
✓ Educator expenses
✓ Student loan interest amounts
✓ Deductions for domestic production activities including manufacturing, engineering, construction, software, etc.
✓ Health insurance amounts paid for the year. Calculate this concerning your net self-employment income.
✓ Penalties paid (if any) for withdrawing early from your savings account.
✓ Retirement account contributions
✓ Health savings account deductions
✓ 50% of the taxes paid for self-employment like Social Security Taxes, Medicare Taxes, etc.
Extending this further, let us show you an instance of how to calculate AGI.
It is extremely easy to calculate AGI and you only need to worry if you aren’t updated with the changing IRS rules. We’re sharing an instance of calculating AGI for an individual having an annual income of
$150,000 & qualifying adjustments as below:
✔ 50% of self-employment taxes: $15000
✔ IRA contributions: $7000
✔Student Loan Interest: $550
✔Self-employed health insurance premiums: $15000
Summing up the adjustments, the final amount gets to be $37,550. Deducting this adjustment amount from an annual income of $150,000, your AGI turns out to be $112,450.
Use our Instant Adjusted Gross Income Calculator Today
You must be curious to discover an amazing & easy-breezy AGI Calculator now, isn’t it? Try the AGI calculator by onlinepaystubgenerator.com & see how easy it gets for you to calculate AGI in a hassle-free way.
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