1. What is Adjusted Gross Income?

Adjusted Gross Income (AGI) is your total gross income minus specific deductions. It's an important number used to determine your taxable income and eligibility for certain tax credits and deductions.

2. How Does the Calculator Work?

The calculator uses the AGI equation:

Where:

• \( Wages \) — Salary, wages, tips, and other compensation
• \( Interest \) — Interest income from bank accounts, bonds, etc.
• \( Dividends \) — Dividend income from investments
• \( Deductions \) — Eligible adjustments like student loan interest, IRA contributions, etc.

Explanation: AGI represents your income after certain "above-the-line" deductions but before standard or itemized deductions.

3. Importance of AGI Calculation

Details: AGI is crucial for determining your tax bracket, eligibility for tax credits and deductions, and is used as the basis for many financial calculations.

4. Using the Calculator

Tips: Enter all income components in USD. Include all taxable wages, interest, and dividends. Deductions should include eligible adjustments to income.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between gross income and AGI?
A: Gross income is your total income before any deductions. AGI is gross income minus specific adjustments.

Q2: What are common adjustments to income?
A: Common adjustments include educator expenses, student loan interest, IRA contributions, and self-employment taxes.

Q3: Why is AGI important for taxes?
A: AGI determines eligibility for many tax credits and deductions, and is the starting point for calculating taxable income.

Q4: How often should I calculate my AGI?
A: You should calculate it annually for tax purposes, but it can also be useful for financial planning throughout the year.

Q5: Where can I find my AGI on my tax return?
A: For Form 1040, it's on line 11 (2022 tax year). The exact line number may change year to year.