- 1 How to Determine My Modified Adjusted Gross Income
- 2 How to Calculate Adjusted Gross Income Using W2
- 3 How does comprehensive income get reported on my 1040?
- 4 What is my AGI and where to I find it?
- 5 What’s My Adjusted Gross Income? (or, How to Fill Out Your 1040)
- 5.0.1 Are you in the National Guard, a fee-based government official or a performing artist? (Line 24)
- 5.0.2 Do you have a health savings account? (Line 25)
- 5.0.3 Have you moved for a new job in the last year? (Line 26)
- 5.0.4 Are you self-employed, have you received tips or wages, or are you a church employee who received payment for your services? (Line 27)
- 5.0.5 Do you have a SEP, SIMPLE or retirement plan other than an IRA? (Line 28)
- 5.0.6 Are you self-employed with health care under that business? (Line 29)
- 5.0.7 Have you withdrawn from a retirement account, bond or CD? (Line 30)
- 5.0.8 Have you paid alimony? (Line 31a and 31b)
- 5.0.9 Have you have made contributions to a traditional IRA? (Line 32)
- 5.0.10 Do you have a student loan? (Line 33)
- 5.0.11 Have you produced a tangible product? (Line 35)
How to Determine My Modified Adjusted Gross Income
Your modified adjusted gross income is an important figure on your Form 1040.
Form 1040 Tax Forms image by Viola Joyner from Fotolia.com
Calculating your modified adjusted gross income is an important step in determining your total tax obligation. Numerous deductions and credits are related to the amount of your MAGI, and a higher MAGI may render you ineligible for certain tax benefits. For example, you may not be able to take a deduction for student loan interest if your MAGI is too high. You also lose the ability to deduct your contribution to an individual retirement account if your MAGI is above a certain level. MAGI calculations are straightforward, consisting primarily of your total income minus certain allowable deductions.
of your income on IRS Form 1040. Lines 7 through 21 of this form are where you report all of your income to the Internal Revenue Service, including tax-exempt income, salaries, wages, dividends, interest, alimony, capital gains, IRA distributions, rental and farm income, unemployment compensation, and Social Security benefits. Total your income on line 22.
Remove certain deductions from your AGI to calculate your MAGI. The IRS considers your MAGI to be your AGI minus eight deductions and exclusions. To compute your MAGI, subtract the deductions for student loan interest, IRA contributions, tuition and fees, domestic production activities, and foreign earned income. You'll also have to subtract the foreign housing exclusion, the exclusion of qualified savings bond interest and the exclusion of employer-provided adoption benefits. The result is your MAGI.
How to Calculate Adjusted Gross Income Using W2
The W-2 form you receive at the end of the year from your employer contains essential information that must be reported on your federal income tax return. Some of the data contained on your W-2 form is used to calculate your federal adjusted gross income (AGI), which is used to determine your federal and state income taxes, as well as your eligibility for most tax credits.
Look at box 1 of the W-2 form you received from your employer. The amount shown in box 1 is your taxable income from employment. If you have more than one employer or receive more than one W-2, total the amount from each form and put this in box 1.
Report your totals from box 1 of your W-2 on line 7 of IRS Form 1040, Form 1040A or Form 1040EZ.
Add any additional income from sources other than W-2 employment. Examples of income from other sources include interest income, unemployment compensation, retirement plan distributions and income from self employment.
Subtract deductions you’re eligible to claim, such as student loan interest, moving expenses and the health savings account deduction. The availability of certain deductions varies depending on the version of 1040 form you use. The result after you subtract deductions is your AGI.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.
How does comprehensive income get reported on my 1040?
As of 2015, on the standard IRS Form 1040, your comprehensive or total income is calculated through lines 7-22. This is different from your adjusted gross income, or AGI, which is figured after taking deductions in lines 23-37. Most of the information for your income comes from other documents; for example, Line 7 "Wages, Salaries and Tips" comes from the W-2 you receive from your employer. Your total income is listed on line 22.
This definition of comprehensive income is different from the comprehensive income that companies have to report. The business version of comprehensive income is not recorded on the 1040 but is instead released through a separate financial statement.
On the first page of Form 1040, you can start listing your income on line 7. This line also requires you to attach any W-2 forms. The subsequent 16 lines, and sublines, include nonwage forms of income that are not captured on the W-2.
For example, you can list any received dividends from your investments on line 9. Line 11 is where you list any alimony received; alimony paid is covered later in the deductions section. Distributions from an IRA are listed on line 15. If you received any unemployment compensation, add it to line 19.
After entering all of your declared forms of income, your last step is to total the income levels from the right column on the form. This means adding all income from lines 7-21.
Your AGI is different, and hopefully much smaller, than your total income. You can figure your AGI by working through the various deductions identified between lines 23-37. If you believe you may have missed some deductions, consult with a tax professional.
What is my AGI and where to I find it?
AGI or Adjusted Gross Income is the figure which represents how much a tax payer earned and is responsible for paying taxes on with respect to the prior tax year. AGI includes all income sources, but is often smaller than the total gross income as a select number of adjustments (deductions, credits, certain expenses, etc) are made to this figure in accordance with the US tax code. These adjustments, which can include retirement accounts, work related expenses, education and other expenses, are often phased out for higher income earners.
Knowing what this figure is for you can be helpful when determining if you qualify for certain tax breaks and/or programs, for example the Earned Income Tax Credit. It is also very commonly used to sign or verify a tax payer’s identity when electronically filing with the IRS.
To identify your AGI on your prior year tax return, look to the following places;
If you filed Form 1040 it will be listed on line 37.
If you filed Form 1040A it will be listed on line 21.
If you filed Form 1040-EZ it will be listed on line 4.
Please note: If you did not file a return last year and did not create a PIN, or you filed AFTER Oct 15th, you can chose to enter "09quot; for your AGI and file without a prior year PIN.
What’s My Adjusted Gross Income? (or, How to Fill Out Your 1040)
While doing taxes is a chore (even for us), there’s something the government does that makes it a little more bearable: It doesn’t tax us on our whole salary.
We report our income, but then the government subtracts various things from it, like our education expenses or IRA contributions, to finally arrive at the amount that it will actually tax us on. That amount is called the Adjusted Gross Income, or AGI.
So, where do we do all these subtractions? Right on the main tax form, the 1040 (you can download one here).
The amounts in lines 23 to 35 will be subtracted from your income to calculate how much income you’ll be taxed on. These are called your “above the line” deductions because they are above the literal line just underneath your Adjusted Gross Income. There’s another type of deduction known as “below the line.” For now, the above the line deductions are important because they apply to every person who files taxes, whereas below the line ones only apply to some.
Above the line deductions are also important because the IRS and some states use them to decide the rate at which you are taxed. You can claim above the line deductions for expenses like student loan interest, contributions to an IRA or contributions to a health savings or flexible spending account. Read on to find out if any of them apply to you.
Many of these items require you to fill out a separate form for that specific deduction and file it along with your tax returns, so we’ve linked to them here so you can print out the forms that you need as you go. Ready to get started?
If you are a K-12 teacher, principal, counselor or aide who worked for at least 900 hours during the school year, you can deduct up to $250 (or $500 if you file jointly and your spouse is also a qualified educator) for books and supplies that your employer didn’t reimburse you for. Enter the amount on this line, up to the maximum allowed.
Are you in the National Guard, a fee-based government official or a performing artist? (Line 24)
If so, fill out Form 2106 or Form 2106-EZ. Enter the final number here. (A “fee-based government official” is someone who performed services as a state or local government employee and was paid entirely or in part on a fee basis.)
Do you have a health savings account? (Line 25)
If you have a health savings account (HSA) that is not part of a retirement plan, fill out Form 8889.
Note: This form tells you to fill out Form 8853 if you have an Archer HSP or a Medicare HSP. If you aren’t sure what kind of health care plan you have, but you know that your employer offers one, the 8853 Instructions explain qualified health care plans in depth and is a good place to look if you have questions about whether or not your health care plan qualifies for tax breaks.
Have you moved for a new job in the last year? (Line 26)
If you have moved sometime in the last tax year because of a new job, this deduction may apply to you. Your new home must be at least 50 miles away from your old home.
Note: The IRS calculates this by subtracting the number of miles from your old home to your old workplace from the number of miles from your old home to your new workplace. If that number is 50 or greater, then you can apply for this deduction by filling out Form 3903.
Are you self-employed, have you received tips or wages, or are you a church employee who received payment for your services? (Line 27)
We recommend going to Schedule SE, and completing that before filling in this line. On the form, the IRS carefully explains who needs to fill out Line 27. Put the final number that you calculate from that form into this item.
Do you have a SEP, SIMPLE or retirement plan other than an IRA? (Line 28)
If so, we recommend reading over Pub. 560 for an in-depth description of who can use these deductions. The chart on the second page of this publication is extremely helpful to figure out how much can be deducted.
Are you self-employed with health care under that business? (Line 29)
If you own your own business and you have health care under that business, you should fill in this line. The insurance plan must be established under the business. Tally up your total premium payments for the year and deduct that number here. If you aren’t sure what your total premium payments are, they should be listed in your W-2.
Have you withdrawn from a retirement account, bond or CD? (Line 30)
If you have withdrawn from your retirement account, bond, CD, etc. and have had to pay an early withdrawal penalty, you need to fill in this line. You should use Form 1099-INT (the form you use to report interest income), to come up with the number you need. The number in Item 2 on this form is the dollar amount of your early withdrawal penalty. Put this amount in the line for Item 30 on your 1040.
Have you paid alimony? (Line 31a and 31b)
If you have paid alimony (not child support), you should fill in the amount you have paid, along with the Social Security Number of the person you paid it to.
Have you have made contributions to a traditional IRA? (Line 32)
This is a big one. If you have made contributions to a Traditional IRA (not a Roth!) this year and you have an earned income (this includes things like wages, salaries, tips, etc.), you should fill this out.
Note: There are limits on how much of that contribution is deductible. If you are covered by a retirement plan at work, this chart spells it out clearly for you. If you are NOT covered by a retirement plan at work, look at this chart for an explanation. If you aren’t sure if you are covered by your employer, box 13 on your W-2 will tell you.
Do you have a student loan? (Line 33)
You can deduct up to $2,500 for the interest you paid on your student loan last year. If you did, you should have received a form 1098-E from the entity to which you paid interest. Do you fit these qualifications?
- You are not filing under the status “married filing separately”
- Your AGI is less than $80,000 if you’re single and $160,000 if you’re married
- You can’t be claimed as a dependent on your parents’ tax returns
Do you fit all of these qualifications?
- You’re a student
- You are not filing under the status “married filing separately”
- Your AGI is less that $80,000 if you’re single and $160,000 if you’re married
- You can’t be claimed as a dependent on your parents’ tax returns
If all the above are true, then you should fill out a 8917 Form. If you still aren’t sure, read the form to find out the exact requirements.
Note: You can’t use both this deduction and education credits for the same student in the same year, so you should compare the tuition fees deduction to education credits for which you qualify to determine which one will give you the bigger break. The IRS explains.
Have you produced a tangible product? (Line 35)
Yes, we realize that is an oddly phrased question. This is what it really means. You need to fill out Form 8903 if you have:
- Produced real estate
- Provided architectural or engineering services
- Sold, leased or produced film or audio recordings
- Sold, leases or produced electricity, natural gas or water
Additionally, make sure you fall under these qualifications.
- If your product was electricity/natural gas or water, you must have produced or extracted it—distributing it or transmitting it does not apply.
- You produced the product, instead of just selling food and beverage at a retail establishment. (For example, while the companies Frito-Lay or Coca-Cola can claim this deduction, restaurant owners cannot.)
- If selling, leasing or distributing a tangible product, that product cannot be land.
- It must have been produced, sold or leased in the U.S.
You’re almost done! Now just add all of your deduction amounts together and enter the total on line 36. Then subtract line 36 from line 22 (your income). Congrats! You have calculated your adjusted gross income.
This story was updated on February 16, 2017.
This publication is not intended as legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor.