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How to Calculate Your Adjusted Gross Income (AGI)

Tax season is going to be here before you know it. While taxable income is usually the most important aspect of filing your taxes, your adjusted gross income is the determinant factor for how much you’ll pay. To avoid shock, you can calculate your adjusted gross income ahead of time, and here’s how. 

Before Determining AGI

Do you need to file your taxes? Determining your adjusted gross income is unnecessary if you don’t need to file your taxes. The minimum requirement to file your taxes if you’re under 65 and single is $10,350 unless you’re self-employed. For those who are self-employed, the minimum income requirement is $400. 

This means that if you make under this amount, you may not need to file your W-2. The number increases if you are over 65, head of the household, or married. However, if you are married and filing separately, the minimum W-2 requirement is $4,050. You can find the whole list of minimum W-2 requirements here

Gather Your Income Statements

The first step to calculating your adjusted gross income is to gather all of your income statements. These are any documents related to income you received throughout the year. This can be, but isn’t limited to:

  • Taxable refunds, credits, or offsets of state and local income taxes
  • Alimony
  • Business income
  • Capital gains or losses
  • Other gains or losses
  • Distributions from retirement accounts that are taxable
  • Rental real estate, royalties, partnerships, S corporations, trusts, etc.
  • Farm income
  • Unemployment compensation
  • Social Security benefits
  • Other income not reported elsewhere on your tax return

When you have all the documents, begin to calculate the sum of all of these amounts. The sum is what’s known as your “total income.” This is the sum of money you received throughout the year. 

Subtract Deductions and Expenses

The more deductions and expenses you have, the better. This lowers the amount of total income you have and decreases the amount of taxes you may owe during tax season. Some of the most popular deductions and expenses include: 

  • Educator expenses, which applies to eligible teachers for up to $250
  • Certain business expenses of reservists, performing artists, and fee-basis government officials
  • Health savings account deduction
  • Moving expenses
  • Deductible part of self-employment tax
  • Self-employed SEP, SIMPLE, and qualified plans
  • Self-employed health insurance deduction
  • Alimony
  • Deduction for contributions made to your traditional IRA
  • Student loan interest deduction
  • Tuition and fees
  • Domestic production activities deduction

You are only allowed to subtract certain amounts from your income, so be sure the deductions and expenses you’re using are valid. For example, for moving expenses, your new workplace must be at least 50 miles farther from your old home than your new job location was from your old home. Check with the Internal Revenue Service or your tax preparer to see if your deductions are eligible. 

Your Adjusted Gross Income

Once you’ve subtracted your deductions and expenses from your total income, this is your adjusted gross income. It can be difficult to calculate your accurate AGI, so be sure to work with a professional if it’s your first time. You can also use an AGI calculator to do all the work for you, but this type of tool still doesn’t assist you if you aren’t sure whether your deductions are valid.

Last Updated: December 02, 2016