The Internal Revenue Service (IRS) utilizes our adjusted gross income (AGI) amount to calculate our annual income tax liability. It is determined by deducting specific adjustments from gross income, including company costs, student loan interest costs, and other costs. A taxpayer’s taxable income is calculated by deducting deductions from their adjusted gross income (AGI).
Other income metrics, such as modified AGI (MAGI), are also used by the IRS for some programs and retirement funds.
The amount of income tax we owe for the entire year is calculated by the IRS using our adjusted gross income (AGI).
Our gross income for the year is totaled to get our AGI. From there, a few income adjustments are subtracted.
Our eligibility to contribute to some types of retirement plans, such as a Roth individual retirement account, as well as the magnitude of our tax deductions, can both be impacted by our AGI (Roth IRA).
Our AGI is modified adjusted gross income (MAGI), which includes some otherwise permitted deductions. AGI and MAGI will frequently be the same for many folks.
Alimony payments and educator costs are among the things deducted from your gross income when determining your AGI.