Why it is important.
Your AGI is the basis for several tax thresholds.
- Determining whether you qualify for certain tax credits
- Determining whether you can deduct medical expense
- 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
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