Adjusted Gross Income (AGI)
Financial term in the Tax category
Definition
Your gross income minus specific adjustments such as student loan interest, IRA contributions, and self-employment tax. AGI is a key figure on your tax return that determines eligibility for many deductions, credits, and retirement contribution limits.
Related Terms
Gross Income
Total income earned before taxes and deductions. For individuals, it includes wages, tips, investment income, and other earnings.
Tax Deduction
An expense that can be subtracted from gross income to reduce taxable income. Common deductions include mortgage interest, student loan interest, and charitable contributions.
Effective Tax Rate
The average rate at which your total income is taxed, calculated by dividing total tax paid by total taxable income. It is always lower than your marginal tax rate because the US uses a progressive tax system.
Frequently Asked Questions
What is Adjusted Gross Income (AGI)?
Your gross income minus specific adjustments such as student loan interest, IRA contributions, and self-employment tax. AGI is a key figure on your tax return that determines eligibility for many deductions, credits, and retirement contribution limits.
Why is Adjusted Gross Income (AGI) important in personal finance?
Adjusted Gross Income (AGI) is an important tax concept that helps individuals make better financial decisions. Understanding Adjusted Gross Income (AGI) can improve your financial planning and help you achieve your money goals.
How does Adjusted Gross Income (AGI) relate to Gross Income?
Adjusted Gross Income (AGI) and Gross Income are related financial concepts. Total income earned before taxes and deductions. For individuals, it includes wages, tips, investment income, and other earnings.
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