Adjusted gross income (AGI) is a figure used in the U.S. tax code. It represents your total taxable income for a given tax year after certain adjustments have been made.
Your AGI number determines your eligibility for certain deductions and credits, along with your overall tax liability. These adjustments include retirement plan distributions, alimony payments, unemployment compensation, taxable scholarship and fellowship grants.
If you want to claim certain deductions or credits on your taxes, you need to know your AGI number. But what exactly is an AGI number, and how can you find yours? Keep reading for all the details you need to know.
Finding Your AGI Number
If you plan to file your returns electronically, the IRS will ask for your AGI number. This number helps determine the amount of tax breaks you qualify for. Additionally, it’s a unique number the IRS uses to identify you. The IRS can alter your exemptions and tax deductions based on your AGI percentage.
You can easily trace your AGI number from your previous tax return forms. However, the form’s outlines vary. You can locate the number on different forms as below — note that several formats of the same form are listed below and differ based on the filing year:
- Form 1040 and 1040-SR – Line 11
- Form 1040EZ – Line 4
- Form 1040A – Line 21
- Form 1040 and 1040-SR – Line 8b
- Form 1040 – Line 7
- Form 1040NR – Line 11
If you still can’t find your AGI number, you can request a tax return transcript from the IRS website. You can choose to:
- Get your transcript online: You’ll need to have access to several different documents to verify your identity before obtaining your transcript online.
- Get your transcript via mail: You’ll need details such as your date of birth, Social Security number and mailing address as indicated on your last year’s return. You’ll receive the transcript in 5 to 10 days.
- Call the IRS: The IRS has a toll-free number (1-800-829-1040) you can use to request your AGI.
If the above options don’t work for you, you can also print your previous year’s tax returns and send them to the IRS.
How Can You Calculate Your AGI?
Calculating your AGI is a fundamental step in understanding your taxable income for the year. Because it’s based on your gross or taxable income, the first step is to determine your gross income for the financial year.
Calculate Your Gross Income
If you’re employed, your employer will give you a W2 form that lists all your gross income for the year. If they don’t give you one, you can get your W2 online.
The form also includes income like bonuses and tips along with your wages. If you have additional income sources, such as rental properties, it’s important to include these earnings as part of your gross income. If you’re self-employed, you’ll need to calculate your earnings and gross profits from your business.
In most cases, your gross income is what you earn before any primary deductions, such as your pension, are applied to your earnings. An incorrect gross income calculation may affect your eligibility for tax breaks. It’s essential to review your W2 form to ensure your gross income accurately reflects your earnings.
Determine Any Income Adjustments
You might need to make additional adjustments based on things like student loans, health insurance, alimony or college tuition payments when you’re determining your AGI. These adjustments come with limitations such as expense limits and minimum requirements. You’ll want to find out if you’re eligible for the adjustments and whether you’re within the maximum expense limit.
Once you have all your income adjustments listed out, tally them up to determine your total income adjustments for the fiscal year. Suppose you’re self-employed. In this case, you need to pay your Medicare and Social Security taxes in full. As a result, you qualify for the credit if you claim the self-employment tax deduction from the IRS. This is an adjustment you may be eligible to make.
Determine Your AGI
As mentioned, your AGI is the resulting number you get from subtracting your gross income from your income adjustments. Since you have both numbers, you can determine your AGI number this way:
Adjusted Gross Income = Total Gross Income – Total Income Adjustments
Here’s an example of how to calculate AGI. Thomas is a construction worker employed by a construction firm. His gross income from his main job is $80,000 annually, and he also gets a yearly bonus of $1,500. Thomas also has a part-time job where he does household repairs. From his second job, Thomas earns a profit of $10,000. This year, Thomas contributed 5% of his income to his IRA and paid $1,000 toward his student loan debt.
- In calculating his AGI, we first need to determine his gross income, which is $80,000 + $1,500 + $10,000 = $91,500.
- The next step is determining his total income adjustments: the 5% IRA contribution ($4,000) and the student loan debt ($1,000). His total income adjustments add up to $5,000.
- To determine his AGI, Thomas subtracts his total income adjustments ($5,000) from his total gross income ($91,500) to get $86,500.
Understanding Modified Adjusted Gross Income
A common element many people overlook when filing their taxes is to use their modified adjusted gross income (MAGI) instead of their adjusted gross income. Knowing the difference beforehand is essential; it can affect the tax breaks you might be eligible for.
MAGI is your AGI, but with tax penalties or credits and allowable deductions incorporated. Your MAGI can help determine:
- Your eligibility for a premium tax credit
- Whether you can make conventional retirement plan contributions
- Whether you can make contributions to a Roth IRA
Calculating your AGI is relatively straightforward, but it’s important to be accurate. This number can affect your tax returns and qualifications for tax exemptions. In this case, hiring an experienced professional to do your taxes can be a wise option. If you prefer not to go that route, you can also use tax software to calculate your AGI.