How to Find Your Adjusted Gross Income
Your Adjusted Gross Income is a foundational figure for your taxes and finances. Understand how this important number is derived and its role in your financial life.
Adjusted Gross Income, or AGI, is a figure on your federal income tax return. It represents your total gross income minus specific, “above-the-line” deductions. This calculation is a preliminary step in determining your final tax obligation. The AGI figure is used to establish eligibility for a variety of tax credits and deductions, and its value influences the amount of tax you may owe.
Locating AGI on a Completed Tax Return
For individuals who have already filed their federal income tax return, finding their Adjusted Gross Income is a straightforward process. The AGI is on Line 11 of the most recent versions of Form 1040, the U.S. Individual Income Tax Return. This is true for Form 1040-SR, used by seniors, and Form 1040-NR, for nonresident aliens.
When applying for financial aid, such as the Free Application for Federal Student Aid (FAFSA), or for loans, you will often be asked to provide your AGI from a prior tax year. If you used tax software to file, you can log into your account and download a PDF copy of your return. If you do not have a copy, you can obtain a free tax transcript from the Internal Revenue Service (IRS) through their online portal.
Information Needed to Calculate AGI
To accurately calculate your AGI, you must first gather all documents related to your income. The primary document for most people is Form W-2, which reports annual wages from an employer. Other income sources are reported on various versions of Form 1099. For instance, Form 1099-INT shows interest income, Form 1099-DIV reports dividends, and Form 1099-NEC details nonemployee compensation for freelance work. Other common sources of income include distributions from retirement accounts (Form 1099-R), proceeds from selling assets (Form 1099-B), and unemployment compensation (Form 1099-G). For those with business income, all revenue must be tallied.
The next step involves gathering documentation for specific “above-the-line” deductions, which reduce your gross income directly. A common deduction is for contributions made to a traditional Individual Retirement Arrangement (IRA), with details found on Form 5498. Another frequent deduction is for student loan interest paid, with the total amount reported on Form 1098-E. Individuals with a Health Savings Account (HSA) can deduct their contributions, reported on Form 8889. Self-employed individuals can deduct one-half of their self-employment taxes, calculated on Schedule SE. Other potential deductions include educator expenses and penalties on the early withdrawal of savings.
The AGI Calculation Formula
The formula to determine Adjusted Gross Income is: Gross Income – Above-the-Line Deductions = AGI. The process begins by summing all sources of income you have gathered to establish your gross income. The deductions you have identified are then totaled. These specific adjustments to income are itemized on Schedule 1 (Form 1040). The sum of these deductions represents your total “above-the-line” deductions and is then subtracted from your gross income figure.
To illustrate, imagine a person with $60,000 in wages from a W-2, $500 in interest income from a 1099-INT, and $1,500 in freelance income. Their gross income is $62,000. This individual contributed $3,000 to a traditional IRA and paid $1,000 in student loan interest. Their total above-the-line deductions are $4,000. Subtracting the $4,000 in deductions from the $62,000 gross income results in an AGI of $58,000, which would be entered on Line 11 of their Form 1040.
Understanding Modified Adjusted Gross Income
Modified Adjusted Gross Income, or MAGI, is a separate but related financial figure calculated from your AGI. The calculation for MAGI starts with your AGI and adds back certain deductions that were previously subtracted. Common add-backs include the student loan interest deduction, tax-exempt interest income, and deducted traditional IRA contributions.
The primary purpose of MAGI is to determine eligibility for a range of tax credits and deductions that have income limitations. For example, your MAGI is used to determine if you can contribute to a Roth IRA and whether you can deduct contributions to a traditional IRA if you have a workplace retirement plan. It is also used to calculate the amount of premium tax credit you may be eligible for to help pay for health insurance purchased through the Health Insurance Marketplace.
Because MAGI effectively raises the income level being considered, it creates a different threshold for eligibility than AGI. The IRS provides specific worksheets and instructions for different tax benefits that outline which deductions must be added back to AGI to calculate the relevant MAGI. Understanding this figure is important for anyone planning to use these specific tax-advantaged accounts or credits.