Video: Adjusted Gross Income (AGI) Explained
It is important to understand how your adjusted gross income (AGI) affects your taxable income. The IRS uses your AGI to determine whether you can claim certain deductions and credits and the amounts you're eligible for. For more information to help you better understand Adjusted Gross Income, also known as AGI, watch this TurboTax tax tip video.
For tax years beginning 2018, the 1040A and EZ forms are no longer available. They have been replaced with new 1040 and 1040-SR forms. For those who are filing prior year returns, you can continue to use form 1040A or EZ for tax years through 2017.
Video transcript
Hi, I'm Amir from TurboTax with some information to help you better understand Adjusted Gross Income, also known as AGI.
The IRS uses your AGI to determine whether you can claim certain deductions and credits and the amounts you're eligible for. The calculation is pretty simple.
- Your total income - certain tax deductions the IRS calls "adjustments to income" = your AGI
You can find a list of those deductions on the first page the standard Form 1040. Note that there will be a lot less of them if you're using a 1040A and none at all are allowed on a 1040EZ (beginning in 2018, there is no longer a 1040EZ or 1040A).
Your AGI will also have an impact on the amount of itemized tax deductions you can report.
- Some expenses must be reduced by a percentage of your AGI.
- Your federal AGI can also have an impact on your state return, as many states use your federal AGI as a starting point for calculating your state taxable income and your eligibility to claim deductions.
For certain tax deductions, the IRS uses a calculation called MAGI or modified adjusted gross income. Your MAGI can change based on the deduction, but it's essentially your AGI plus any deductions the IRS requires you to add back in, like tax exempt interest income. Calculating your MAGI helps to determine if you qualify for these deductions.
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