• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The College Investor

Student Loans, Investing, Building Wealth

  • About
  • Podcasts
  • Research
  • Contact
  • Save For College
      • How To Start

      • How To Save For College
      • How To Pay For College
      • What Is the Average Cost of College?
      • What Is A 529 Plan and Where to Open One in Your State
      • How Much Should You Have In A 529 Plan By Age
      • How To Use A 529 Plan For Private Elementary And High School
      • What Are Qualified Expenses For A 529 Plan (And What Doesn’t Count)?
      • The Best Brokers To Open A 529 Plan
      • Tools + Accounts

      • 529 Plans: The Ultimate College Savings Plan
      • 529 Plan Contribution Limits
      • Prepaid Tuition Plans | What To Know
      • Understanding And Using 529A ABLE Accounts
      • Using A Roth IRA To Save And Pay For College
      • FAFSA Deadlines for Financial Aid
      • CollegeBacker Review
      • Upromise Review
      • UNest Review
      • Other Options

      • Student Loan And Financial Aid Programs By State
      • The Guide To Military And VA Education Benefits
      • How To Fill Out The FAFSA
      • How To Find College Scholarships
      • The Best College Scholarship Search Websites
      • How To Find Grants To Pay For College
      • Pell Grants: What They Are And How To Qualify
      • Understanding Federal Work-Study
      • How To Use A 529 Plan If Your Child Doesn’t Go To College
  • Student Loans
      • Borrowing

        • How Student Loans Work
        • How To Apply For A Student Loan
        • Best Student Loans And Rates In March 2023
        • 10 Best Private Student Loans Of March 2023
        • Best Student Loans To Pay For Graduate School
        • Best Student Loans To Pay For Medical School
        • Parent Loans To Pay For College
        • No-Cosigner Student Loan Options
        • Guide To Income Sharing Agreements (ISAs)
        • Best International Student Loans
      • Get Out Of Debt

        • Best Student Loan Refinance Companies In March 2023
        • Best Student Loan Repayment Plans
        • Best Student Loan Refinancing Bonuses And Promotional Offers Of March 2023
        • Student Loan Forgiveness Programs (The Complete List)
        • The Full List Of Student Loan Forgiveness Programs By State
        • Public Service Loan Forgiveness (PSLF)
        • Top Student Loan Scams
        • Average Student Loan Monthly Payment
        • Average Student Loan Debt By Year
      • Reviews

        • Credible Review
        • Splash Review
        • Ascent Review
        • Citizens Bank Review
        • Commonbond Review
        • Earnest Review
        • ELFI Review
        • Laurel Road Review
        • LendKey Review
        • SoFi Review
  • Investing
      • How To Start

        • How To Start Investing in High School
        • How To Start Investing In College
        • How To Start Investing In Your Twenties For 22 – 29 Year Olds
        • How To Start Investing In Your 30s For 30 – 39 Year Olds
        • How To Start Investing With $100 Or Less
        • How To Give Kids The Gift Of Stock
        • What Is Dividend Growth Investing
        • IRA Rollover Chart
      • Tools + Accounts

        • Best Online Stock Brokers
        • The Best Traditional And Roth IRA Accounts
        • The Best Robo-Advisors
        • The Best Investing Apps
        • The Best Places to Trade Options
        • The Best Places To Open A Health Savings Account
        • The Best Solo 401k Providers
        • The Best Self-Directed IRA Providers Of 2023
        • Best Cryptocurrency Exchanges
      • Reviews

        • Vanguard Review
        • Fidelity Review 2023
        • M1 Finance Review
        • TD Ameritrade Review 2023
        • Charles Schwab Review
        • Robinhood Review
        • Webull Review
        • Betterment Review 2023
        • Wealthfront Review
  • Earn More Money
      • Extra Income

        • 20 Best Side Hustles You Can Start Earning With In 2023
        • 54 Side Hustle Ideas To Make Money Fast In 2023
        • 100 Ways To Make Money In College In 2023
        • 80 Ways To Make Money From Home In 2023
        • 5 Quick Money Making Ideas (That Take Less Than 1 Hour)
        • 10 Interesting Ways You Can Make Money Driving
        • High-Paying Side Gigs That Earn $1,000 or More Per Month
        • The 10 Best Money-Making Apps
        • Paid Surveys: Earn Money For Giving Your Opinion Online
        • 10 Crazy Ways To Make $10,000 You’ve Never Heard Of
      • Build Wealth

        • 40 Best Passive Income Ideas To Build Wealth In 2023
        • 3 Ways To Make $50,000 Per Year Without Working With Passive Income
        • How To Become A Real Estate Investor With Just $500
        • 15 Best Online Business Ideas
        • Residual Income: 7 Super Smart Ways to Build It
        • The Most Common Multiple Income Streams
        • How To Become A Real Estate Mogul With Only $10,000
      • Reviews

        • Fundrise Review
        • RealtyMogul Review
        • FarmTogether Review
        • AcreTrader Review
        • Swagbucks Review
        • Survey Junkie Review
        • TopCashback Review
        • DoorDash Review
  • Personal Finance
      • Banking

        • 10 Best High Yield Savings Accounts Of March 2023
        • 10 Best Money Market Accounts Of March 2023
        • 10 Best Free Checking Accounts In March 2023
        • Best Bank CD Rates Of March 2023
        • 10 Best Business Checking Accounts In March 2023
        • Best Online Banks Of March 2023
        • Best Credit Unions Nationwide Of March 2023
        • Best College Student Checking Accounts Of March 2023
      • Insurance

        • Best Life Insurance Companies
        • Renters Insurance
        • Car Insurance
        • Pet Insurance
        • Umbrella Insurance
        • Disability Insurance
        • Tuition Insurance
        • Travel Insurance
      • Credit Tools

        • Best Budgeting Apps
        • Cash Advance Apps
        • How To Get A Free Credit Score Report
        • Best Credit Monitoring Services For 2023
        • Debt Settlement: Inside The Secret World
        • Credit Repair Explained: Should You Pay For Help?
        • Best Personal Loan Companies And Lenders
        • Online Loan Companies To Borrow From Home
      • Tax

        • Best Tax Software
        • Free Tax Software
        • IRS Tax Refund Calendar
        • Common IRS Questions and Errors
        • Federal Tax Brackets
        • Capital Gains Tax Brackets
        • 401k Contribution Limits
        • IRA Contribution Limits
        • HSA Contribution Limits
  • Awards
  • Search
Home » Taxes » DIY » How To Calculate Your Adjusted Gross Income (AGI)

How To Calculate Your Adjusted Gross Income (AGI)

Updated: August 30, 2022 By Robert Farrington

At The College Investor, we want to help you navigate your finances. To do this, many or all of the products featured here may be from our partners. This doesn’t influence our evaluations or reviews. Our opinions are our own. Any investing information provided on this page is for educational purposes only. The College Investor does not offer investment advisor or brokerage services, nor does it recommend buying or selling particular stocks, securities, or other investments. Learn more here.Advertiser Disclosure

There are thousands of financial products and services out there, and we believe in helping you understand which is best for you, how it works, and will it actually help you achieve your financial goals. We're proud of our content and guidance, and the information we provide is objective, independent, and free.

But we do have to make money to pay our team and keep this website running! Our partners compensate us. TheCollegeInvestor.com has an advertising relationship with some or all of the offers included on this page, which may impact how, where, and in what order products and services may appear. The College Investor does not include all companies or offers available in the marketplace. And our partners can never pay us to guarantee favorable reviews (or even pay for a review of their product to begin with).

For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. TheCollegeInvestor.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products and services are presented without warranty.

how to calculate your adjusted gross income (AGI)

Typically, when a government agency or bank asks about your income, what it really wants to know is your adjusted gross income (AGI). AGI is your total income less certain adjustments. 

Adjustments to income can include such items as educator expenses, student loan interest, alimony payments, or retirement account contributions and more. Your AGI will always be equal to or less than your total income.

AGI can be incredibly important at tax time as it can affect the size of certain tax deductions and credits. It can also affect your eligibility to contribute to certain retirement plans (such as your Roth IRA or traditional IRA). Keep reading to learn more about why it's important to know your AGI and how to calculate it.

Table of Contents
How To Calculate Your AGI
Adjusted Gross Income Vs. Taxable Income
How Does The IRS Use AGI?
Do Any Other Government Agencies Use AGI?
Final Thoughts

How To Calculate Your Adjusted Gross Income (AGI)

Adjusted gross income is calculated as follows: Total Income (Gross Income) less “above-the-line” deductions.

Above-the-line deductions are called “above-the-line” because they are on the first page of the 1040 tax form above the line where Adjusted Gross Income is calculated. For everyone who uses tax software, above-the-line deductions aren’t perfectly delineated from standard deductions. The most common above-the-line deductions include:

  • Contribution to Traditional IRA
  • Certain expenses for books and supplies incurred by teachers
  • Interest on student loans
  • Higher Education expenses
  • Contributions to Health Savings Accounts (HSAs)
  • Retirement plan savings for the self-employed
  • Self-employed health insurance deduction
  • 50% of self-employment tax
  • In some cases, Alimony paid (this is for people with divorces before Dec. 31, 2018)
  • Charitable contributions up to $300 (In 2020 only)
  • Certain expenses of performing artists, state officials, and Army Reserve members
  • Moving expenses for Armed Forces members
  • Penalties forfeited because of premature withdrawal of funds

Some less common deductions carry-over from the past, but these above-the-line deductions won’t apply to most people.

Focusing on above-the-line deductions is a great way to reduce your overall tax burden. If you’re self-employed (or have a side hustle), you may qualify to contribute pre-tax money to a self-employment retirement plan. People with high deductible health plans may be able to contribute money to an HSA. These actions help you build wealth and cut down on taxes.

Adjusted Gross Income Vs. Taxable Income

Taxable income is the amount of money you have to pay taxes on. This will be your taxable income less either the standard deduction or your itemized deductions. If you own a business, your “Qualified Business Income Deduction” will also be excluded from your taxable income.

Your taxable income drives your tax burden. However, the tax burden isn’t set until after credits (such as the Child Tax Credit, the Dependent Care Credit, Earned Income Tax Credit, and the American Opportunity Credit) is calculated. These directly cut down on your tax burden and drive up your refund.

It's important to note that some states use AGI and some states use federal taxable income for calculating state taxes.

How Does The IRS Use AGI?

The IRS uses AGI to determine what credits and deductions a person is allowed to take. If your AGI is either too high or too low, you won’t qualify for the Earned Income Tax Credit. Your AGI may also lead to phaseouts for the child or dependent tax credit.

Your AGI can also affect whether you’re eligible to take certain income-based itemized deductions. For example, the IRS currently allows all taxpayers to deduct their total qualified un-reimbursed medical care expenses that exceed 7.5% of their adjusted gross income. If you paid $7,000 in medical expenses, and you had an AGI of $40,000, you could claim $4,000 as an itemized deduction. 

When combined with mortgage interest and charitable giving, it may make sense to itemize. By contrast, the same person with $140,000 in AGI won’t be able to claim any medical expenses.

AGI also influences whether you can contribute to an IRA. This article explains the exact details of who can contribute to an IRA, and when phaseouts begin.

Do Any Other Government Agencies Use AGI?

Most states that charge income tax rely on the federal AGI to calculate the state income tax that a person owes. Those state agencies may further modify the AGI to either raise or lower tax liability for certain individuals.

Many government agencies use AGI or Modified Adjusted Gross Income to determine a person’s eligibility for benefits. For example, the Department of Education requires all people who want Federal aid to supply their AGI on the Free Application for Federal Student Aid (FAFSA). This one input determines whether you’re eligible for subsidized loans, grants, and other forms of aid.

The Department of Health and Human Services also relies heavily on MAGI (Modified Adjusted Gross Income) to determine eligibility for health insurance subsidies, Medicaid, and CHIP. MAGI is AGI less certain deductions. In the case of DHS, MAGI deducts untaxed foreign income, Supplemental Security Income, and untaxed Interest from AGI.

Final Thoughts

Careful planning throughout the year can make it easy to lower AGI even if your total income grows. Sometimes, timing major expenses (like a higher education course) can lead to major tax benefits.

But often lowering your AGI will involve contributing more money to tax-advantaged retirement plans or an HSA. Many people prioritize regular savings to these accounts throughout the year. However, you have until the April 15th tax deadline to make your contributions.

Visit our Tax Help Center for more tax tips and advice >>>

Robert Farrington
Robert Farrington

Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.

He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.

He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.

Editor: Clint Proctor

Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.
Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors'. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone's responsibility to ensure all posts and/or questions are answered.
Subscribe
Connect with
I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree
Notify of

I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree

2 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

Primary Sidebar

Tax Resources

Featured Tax Reviews

>  H&R Block (recommended)
>  TurboTax (recommended)
>  Cash App Taxes
>  TaxSlayer
>  TaxAct
>  FreeTaxUSA

Tax Software

  • Best Tax Software 2023
  • Free Tax Software 2023
  • Best Crypto And NFT Tax Software For 2023

Tax Brackets

  • Federal Tax Income Brackets
  • Capital Gains Tax Brackets

More on Taxes

  • When To Expect My Tax Refund? The IRS Tax Refund Calendar 2023
  • Common IRS Where’s My Refund Questions and Errors
  • IRS Where’s My Refund Reference Codes
  • TurboTax, H&R Block, TaxAct, And TaxSlayer Pricing Comparison
  • The Best Tax Software For Student Loan Borrowers
  • How To Find The Best Tax Software For Students And Recent Grads
  • The Most Common Tax Deductions
  • Stopping Tax Offsets Due To Student Loan Debt
  • Tax Resource And Help Center

Footer

Who We Are

The College Investor is an independent, advertising-supported financial media publisher, focusing on news, product reviews, and comparisons.

Connect

  • Contact Us
  • Advertise
  • Press & Media

About

  • About
  • Our Team
  • Podcast
  • Editorial Guidelines
  • How We Make Money
  • Archives

Social

Copyright © 2023 · The College Investor · Privacy Policy ·Terms of Service · DO NOT Sell My Personal Information

wpDiscuz