Adjusted gross income

Adjusted gross income

For United States individual income tax, taxable income is adjusted gross income (AGI) less allowances for personal exemptions and itemized deductions. Adjusted gross income is total gross income minus specific items laid out in the tax code.[1] For most individual tax purposes, AGI is more relevant than gross income.

Gross income is sales price of goods or property, less cost of the property sold, plus other income. It includes wages, interest, dividends, business income, rental income, and all other types of income. Adjusted gross income is gross income less deductions from a business or rental activity and 21 other specific items.

Several deductions (e.g. medical expenses and miscellaneous itemized deductions) are limited based on a percentage of AGI. Certain phase outs, including those of lower tax rates and itemized deductions, are based on levels of AGI. Many states base state income tax on AGI with certain deductions.

Contents

Gross income

Gross income includes "all income from whatever source," and is not limited to cash received. It specifically includes wages, salary, bonuses, interest, dividends, rents, royalties, income from operating a business, alimony, pensions and annuities, share of income from partnerships and S corporations, and income tax refunds.[2] Gross income includes net gains for disposal of assets, including capital gains and capital losses. Losses on personal assets are not deducted in computing gross income or adjusted gross income.

Adjustments

Gross income is reduced by certain items to arrive at adjusted gross income.[3] These include:

  • Expenses of carrying on a trade or business including most rental activities (other than as an employee)
  • Certain business expenses of teachers, reservists, performing artists, and fee-basis government officials,
  • Certain moving expenses,
  • One-half of self-employment tax,
  • Penalties imposed by financial institutions and others on early withdrawal of savings,
  • Alimony paid (which the recipient must include in gross income),
  • College tuition, fees, and student loan interest (with limitations and exceptions),
  • Jury duty pay remitted to the juror's employer,
  • Domestic production activities deduction, and
  • Certain other items of limited applicability.

Reporting on Form 1040

Gross income is reported on U.S. Federal individual income tax returns (Form 1040 series) is reported by type of income. Supporting schedules and forms are required in some cases (e.g., Schedule B for interest and dividends). Income of business and rental activities, including those through partnerships or S corporations, is reported net of the expenses of the business. See Schedule C for business, Schedule E for rentals, and Schedule F for farms.

Modified AGI

Certain tax calculations are based on modified versions of AGI. The definition varies according to the purpose for which it is used. These modified versions may add certain items to AGI that were excluded in computing gross income. Common additions include tax exempt interest and the excluded portion of Social Security benefits.

References

  1. ^ 26 USC 62.
  2. ^ 26 USC 61.
  3. ^ [1] 26 USC 62.

Further reading

IRS Materials


Wikimedia Foundation. 2010.

Игры ⚽ Поможем решить контрольную работу

Look at other dictionaries:

  • Adjusted Gross Income — (AGI) is a United States tax term for an amount used in the calculation of an individual s income tax liability. AGI is calculated by taking an individuals gross income and subtracting the income tax code s enumerated deductions, and is an… …   Wikipedia

  • adjusted gross income — n: an individual s gross income decreased by the amount of deductions allowed esp. for business expenses Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. adjusted gross income …   Law dictionary

  • adjusted gross income — ( AGI) gross income less allowable adjustments, which is the income on which an individual is taxed by the federal government. Bloomberg Financial Dictionary * * * adjusted gross income adjusted gross income ➔ income * * * adjusted gross income… …   Financial and business terms

  • Adjusted Gross Income - AGI — A measure of income used to determine how much of your income is taxable. Adjusted gross income (AGI) is calculated as your gross income from taxable sources minus allowable deductions, such as unreimbursed business expenses, medical expenses,… …   Investment dictionary

  • adjusted gross income — In the USA, the difference between the gross income of a taxpayer and the adjustments to income …   Accounting dictionary

  • adjusted gross income — A tax law term for gross income less the deductions permitted by law …   Ballentine's law dictionary

  • adjusted gross income — (AGI)  A measure of personal income used by the INTERNAL REVENUE SERVICE. AGI includes all sources of personal income minus allowances for contributions to INDIVIDUAL RETIREMENT ACCOUNTS, KEOGH PLANS, alimony payments, and other adjustments …   American business jargon

  • adjusted gross income — /əˌdʒʌstɪd grəυs ɪnkʌm/ noun US a person’s total annual income less expenses, pension contributions, capital losses, etc., used as a basis to calculate federal income tax. Abbreviation AGI …   Dictionary of banking and finance

  • adjusted gross income — (in U.S. income tax returns) the total of an individual s wages, salaries, interest, dividends, etc., minus allowable deductions. Abbr.: AGI * * * …   Universalium

  • adjusted gross income — (in U.S. income tax returns) the total of an individual s wages, salaries, interest, dividends, etc., minus allowable deductions. Abbr.: AGI …   Useful english dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”