What Is Adjusted Gross Income (AGI)?
Adjusted Gross Income (AGI) is an individual’s total gross income minus specific deductions. AGI is used to calculate taxable income and determine eligibility for various tax credits and deductions.
Key Takeaways
- Definition: Total income after specific deductions.
- Purpose: To determine taxable income and eligibility for tax benefits.
- Calculation: Gross income minus adjustments such as student loan interest, retirement contributions, and tuition fees.
Common Adjustments to Income
- Retirement Contributions: Contributions to retirement accounts like IRAs.
- Student Loan Interest: Interest paid on student loans.
- Tuition and Fees: Educational expenses that qualify for adjustment.
Importance of AGI
AGI is a crucial figure in tax calculations, affecting eligibility for tax credits, deductions, and determining overall tax liability.
