Adjusted Gross Income (AGI)

Adjusted gross income (AGI) is the amount of money you earn from all sources before any deductions are taken out. It is used to determine your tax liability and may also affect your eligibility for certain government programs.

There are a few different ways to calculate your AGI. The most common way is to add up all of your income from all sources, including wages, salaries, tips, interest, dividends, capital gains, and rental income. Then, subtract any deductions that you are eligible for, such as the standard deduction, itemized deductions, and personal exemptions.

The standard deduction is a fixed amount that you can subtract from your income if you do not itemize your deductions. The amount of the standard deduction depends on your filing status. In 2023, the standard deduction is $12,950 for single filers, $25,900 for married couples filing jointly, and $19,400 for heads of households.

Itemized deductions are specific expenses that you can subtract from your income if you choose to do so. Some common itemized deductions include medical expenses, mortgage interest, charitable contributions, and state and local taxes.

Personal exemptions are amounts that you can subtract from your income for yourself, your spouse, and any dependents that you claim. In 2023, the personal exemption is $4,400 for each person.

Once you have calculated your AGI, you can use it to determine your tax liability. The tax brackets for 2023 are as follows:

• 10%: Income up to $10,275
• 12%: Income from $10,275 to $41,775
• 22%: Income from $41,775 to $89,075
• 24%: Income from $89,075 to $170,500
• 32%: Income from $170,500 to $215,950
• 35%: Income from $215,950 to $539,900
• 37%: Income over $539,900

You can also use your AGI to determine your eligibility for certain government programs, such as the earned income tax credit and the child tax credit.

It is important to note that AGI is not the same as taxable income. Taxable income is the amount of income that is subject to tax after all deductions have been taken into account. The difference between AGI and taxable income is the amount of your itemized deductions and personal exemptions.

If you have any questions about how to calculate your AGI, you should consult with a tax professional.