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While we work hard to provide accurate and up to date information that we think you will find relevant, Forbes Advisor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof. Your state tax return might also use your federal AGI as a starting point. If you file taxes online , your software will calculate your AGI.
According to the IRS, for most taxpayers, modified adjusted gross income, or MAGI, is simply adjusted gross income before subtracting deductible student loan interest. It can also be a baseline for determining the phaseout level of some credits and tax-saving strategies, and sometimes the formula for MAGI can depend on the type of tax benefit it applies to. What is adjusted gross income AGI? How is adjusted gross income AGI calculated?
Social Security. Real estate. And then subtract:. Educator expenses. Certain business expenses. All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation.
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Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective Life and its products and services, visit www. Tax calculators are available online to help you determine your deductions with greater ease.
There are also several above-the-line tax deductions to consider when calculating your AGI, which could help you maximize your return, or minimize the amount you owe. Some tax deductions, however, have limits. Your AGI is the basis for your taxes, not your gross income, because it represents your actual income. Your AGI also determines how you qualify for certain tax deductions and tax credits. Some tax credits and deductions can benefit you more if your adjusted gross income is lower.
If, for example, your out-of-pocket medical and dental bills exceed 7. The lower your AGI and the higher your medical and dental expenses, the more you can deduct those expenses. Your adjusted gross income is also used for your state tax return, which is why you need to complete your federal return first. Modified adjusted gross income MAGI is essentially your AGI after factoring in certain tax deductions or penalties, or certain additions to income.
MAGI is used for different tax credits and deductions. The modified adjusted gross income can add a bit back into your income, such as foreign earned income, student loan interest, IRA deductions, and tax-exempt interest earned from tax-free bonds such as municipal bonds. The IRS provides instructions on its website for calculating MAGI on specific forms such as Form , which is used to calculate net investment income tax.
This is determined by looking back two tax years. How We Make Money. Cynthia Widmayer.
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