How to calculate Adjusted gross income [AGI]

Why it is important.

Your AGI is the basis for several tax thresholds.

  1. Determining whether you qualify for certain tax credits
  2. Determining whether you can deduct medical expense
  3. Your state tax is based on this number.

The first step is to find out your Taxable income. You can find this number in box#1 on your W2 form. you can also find this number on your pay stub.

Second step. Add any other taxable income to this number such as Interest income.

Now subtract only these expenses from the total taxable income.

  • Educator expenses
  • Moving expense
  • Penalty for early withdrawal of savings
  • alimony paid
  • IRA deduction
  • Student loan interest deduction
  • tuition and fees

A few more for self-employed  For complete list refer form 1040 item 23 to 35

The number you get after this subtraction is AGI

The next step is to calculate MAGI

Best book to read before you start investing.

The Simple Path to Wealth: Your roadmap to financial independence and a rich, free life

I like audiobook versions of this book

Try Audible and Get Two Free Audiobooks

 

Leave a Reply