Adjusted Gross Income

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Adjusted Gross Income

About Adjusted Gross Income:

Adjusted Gross Income (AGI) is the Gross income (including all taxable sources) reduced by a percentage of income (because of certain adjustments), for example charitable contributions, deductible IRA contribution, student loan interest and miscellaneous itemized deductions.

AGI may be defined as an intermediate step in calculating taxable income. It is the key to determining the taxpayer eligibility for certain tax benefits and the phase-out of the taxpayer eligibility for others. It is also the amount used for personal and dependent exemptions and computing deductions (the standard deduction or itemized deductions) based on, or limited by, certain items, such as medical expenses, arriving, then, to the amount of taxable income, the amount on which you income tax bill will be based. See Above-the-line deductions.

In other words, AGI is also the amount from which deductions are deducted. AGI is subtracted by the value of personal and dependency exemptions and by either the standard deduction or the total of the taxpayer itemized deductions. The resulting amount is your taxable income, which will actually be taxed.

In the 1980s, the Adjusted Gross Income amount was determined by the taxpayer from gross income minus business expenses and other deductions, such us alimony payments, IRA contributions and Keogh payments. Itemized deductions for such items as medical expenses, interest payments, and real estate taxes were not reduced to derive adjusted gross income. Former IRC (check if this IRC provision is current here) §62. See Adjusted Gross Income and Adjusted Gross Income in the World Legal Encyclopedia.

Adjusted Gross Income and State Tax

AGI is, from state perspective, the taxpayer federal adjusted gross income from all sources reduced or increased by all state income adjustments. For example, in California. For more information about taxes in California, click here.

In Massachusetts, the Adjusted gross income is the state gross income reduced by business expenses and certain amounts claimed on the state Schedule Y, Lines 1-10, such as alimony paid or student loan interest.

State Income Tax

See Tax exemption and Tax exemption.

Description and Definition of Adjusted Gross Income (AGI)

Your Adjusted Gross Income (AGI) is your gross income less allowable adjustments, such as IRAs, up to $1,000 of interest on higher education loans, alimony, medical savings accounts, job-related moving expenses, any penalty paid on the early withdrawal of savings, the deduction for 50% of the self-employment tax, and SIMPLE and Keogh deductions. AGI is the key to determining your eligibility for certain tax benefits and the phase-out of your eligibility for others such as personal exemptions, itemized deductions, and the rental loss allowance.


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