Adjusted Gross Income (AGI) Calculator
Use this calculator to estimate your Adjusted Gross Income (AGI). AGI is a crucial figure on your tax return, as it determines your eligibility for various tax credits, deductions, and your overall tax liability. It's calculated by taking your gross income and subtracting certain "above-the-line" deductions.
Gross Income Sources
Above-the-Line Deductions
Understanding Adjusted Gross Income (AGI)
Adjusted Gross Income (AGI) is a key figure on your federal income tax return. It's essentially your gross income minus specific deductions, often referred to as "above-the-line" deductions. Your AGI is used to determine your eligibility for various tax credits, deductions, and even certain investment opportunities. It's also the starting point for calculating your taxable income.
What is Gross Income?
Gross income includes all taxable income you receive during the year. Common sources include:
- Wages, Salaries, and Tips: Income from your employer.
- Taxable Interest and Dividends: Earnings from savings accounts, investments, and stocks.
- Business Income: Net profit from self-employment or a business you own.
- Capital Gains: Profits from selling assets like stocks or real estate.
- IRA and Pension Distributions: Money withdrawn from retirement accounts.
- Unemployment Compensation: Benefits received if you were unemployed.
- Other Income: This can include gambling winnings, jury duty pay, and other miscellaneous taxable income.
What are Above-the-Line Deductions?
These are specific deductions that reduce your gross income to arrive at your AGI. They are called "above-the-line" because they are subtracted before you reach the "line" for AGI on your tax form. Some common above-the-line deductions include:
- Educator Expenses: Up to a certain amount for unreimbursed expenses paid by eligible educators.
- Health Savings Account (HSA) Deduction: Contributions made to an HSA.
- Self-Employment Tax Deduction: One-half of the self-employment tax paid.
- Self-Employed Health Insurance Deduction: Premiums paid for health insurance if you are self-employed.
- IRA Deduction: Contributions to a traditional IRA, subject to income and other limitations.
- Student Loan Interest Deduction: Interest paid on qualified student loans, up to a certain limit.
Why is AGI Important?
Your AGI is critical for several reasons:
- Taxable Income Calculation: It's the foundation upon which your taxable income is built. After AGI, you subtract either the standard deduction or itemized deductions to arrive at your taxable income.
- Eligibility for Tax Credits: Many valuable tax credits, such as the Child Tax Credit, Earned Income Tax Credit, and education credits, have AGI phase-out limits.
- Deduction Limitations: The ability to claim certain itemized deductions (like medical expenses or charitable contributions) can be limited by a percentage of your AGI.
- Investment Opportunities: Eligibility for certain retirement accounts (like Roth IRAs) and other investment vehicles can be tied to your AGI.
Example Calculation:
Let's say John has the following income and deductions:
- Wages: $70,000
- Taxable Interest: $100
- Ordinary Dividends: $150
- IRA Deduction: $6,000
- Student Loan Interest: $1,000
Gross Income: $70,000 (Wages) + $100 (Interest) + $150 (Dividends) = $70,250
Above-the-Line Deductions: $6,000 (IRA) + $1,000 (Student Loan Interest) = $7,000
Adjusted Gross Income (AGI): $70,250 – $7,000 = $63,250
This AGI of $63,250 would then be used to determine John's eligibility for further deductions and credits.
Total Gross Income: ' + formatter.format(totalGrossIncome) + '
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'Total Above-the-Line Deductions: ' + formatter.format(totalDeductions) + '
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'Your Estimated Adjusted Gross Income (AGI): ' + formatter.format(agi) + '
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