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AGI Formula:
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Adjusted Gross Income (AGI) is your total gross income minus specific deductions ("above-the-line" deductions). It's an important number used to determine your taxable income and eligibility for certain tax credits and deductions.
The calculator uses the AGI formula:
Where:
Explanation: AGI serves as the basis for calculating your taxable income after accounting for standard or itemized deductions and exemptions.
Details: AGI is crucial for determining your tax bracket, eligibility for tax credits and deductions, and is used by financial institutions when evaluating loan applications.
Tips: Enter your total income and above-the-line deductions in USD. Common above-the-line deductions include educator expenses, student loan interest, and contributions to retirement accounts.
Q1: What's the difference between AGI and taxable income?
A: AGI is your income after above-the-line deductions but before standard/itemized deductions and exemptions. Taxable income is AGI minus these additional deductions.
Q2: What are common above-the-line deductions for 2025?
A: These may include educator expenses, student loan interest, HSA contributions, self-employment taxes, and traditional IRA contributions.
Q3: Why is AGI important beyond taxes?
A: AGI is often used to determine eligibility for government programs, financial aid, and certain tax credits that phase out at higher income levels.
Q4: How often does the IRS update AGI calculation rules?
A: The IRS may adjust deduction limits and qualifying expenses annually for inflation. Always check the latest tax year guidelines.
Q5: Can AGI be negative?
A: Yes, if your above-the-line deductions exceed your total income, resulting in a negative AGI, though this is uncommon.