What is adjusted gross income?
Adjusted gross income is the amount of gross income minus certain deductions or adjustments. It is used to determine tax liability. In other words, the adjusted gross income is the amount of money that is used to calculate the taxes that are owed.
How to calculate adjusted gross income?
To calculate adjusted gross income, subtract certain expenses from gross income. These expenses can include items such as Education expenses, student loan interest, any contributions, and alimony payments.
Difference between Adjusted Gross Income (AGI) & Modified Adjusted Gross Income (MAGI)
AGI is the standard measure of an individual's taxable income, which is usually arrived at by subtracting certain deductions from their total income. MAGI takes AGI one step further, making certain adjustments or additions to account for items excluded in the calculation of AGI. Generally, these adjustments include things like tax-free Social Security benefits, student loan interest deductions, and foreign-earned income exclusion.