When reviewing your return, you may have noticed a discrepancy between your total income and adjusted gross income (AGI). The AGI on your return is the total income minus specific deductions. Therefore, your AGI will never be higher than your total income; however, it may be lower. It is worth understanding your AGI because it’s what the IRS uses to calculate any credits and deductions you are eligible to claim. Ultimately, these deductions are used to calculate your taxable income. Continue reading for a breakdown of Adjusted Gross Income and how it impacts your return.
What is gross income?
Gross income is the amount you earn before withholding money for taxes, IRAs, and other accounts and deductions. Gross income can include wages, capital gains, dividends and interest, royalties, and retirement income.
What is adjusted gross income (AGI)?
Your adjusted gross income (AGI) is the dollar amount used to calculate your tax bill. To find your AGI, start with your gross income and then apply your tax deductions. You can expect your AGI to be less than your gross income. You don’t have to pay taxes on all your earned income. Your AGI will show you how much of your income is taxable.
What deductions are used to find my AGI?
Some of the deductions that are included in calculating your AGI are:
- IRAs and other retirement contributions
- Medical expenses
- Healthcare savings account deductions
- Alimony
- Half of the self-employment tax
- Student loan interest
- Jury duty pay to a filer’s employer
- Losses from the sale or exchange of property
What deductions depend on my AGI?
Some deductions use your AGI to calculate how much you can take. They might be limited by your AGI. This applies to many itemized deductions. The following deductions are affected by your AGI.
- Mortgage insurance premiums
- Charitable donations
- Gambling losses
- Natural disaster deduction
- Mortgage interest
- State and local income
How do I calculate my AGI?
Of course, TaxSlayer automatically takes care of this calculation for you. However, understanding how your AGI is figured is fairly straightforward.
Adjusted Gross Income =
Total Income (Line 9 of Form 1040) – Total Adjustments (Line 10 of Form 1040)
When e-filing, the IRS requires you to validate your tax return by including your prior year AGI or your prior year self-selected PIN.
If you are a first-time filer over the age of 16, enter zero for your AGI. If you need to calculate your AGI before you e-file, take your gross income and deduct any above the line deductions you qualify for.
Where can I find my AGI from previous years?
You will find your AGI on line 11 of Form 1040 or 1040-SR.
If you filed with TaxSlayer last year, we will have your prior year return available for you to access. It will show your AGI from last year.
What if I don’t have my prior year return?
If you do not have a copy of last year’s tax return:
- Use the Get Transcript Online tool to view your AGI. Select the Tax Return Transcript and fill out the “Adjusted Gross Income” line. To do this online you have to pass the Secure Access verification process.
- Or use Get Transcript by Mail or call 800-908-9946 to request a Return Transcript. Allow 5 to 10 days for delivery.
What is a PIN and why do I need it?
A PIN is an identification number that acts as your online signature when you e-file your state and federal taxes. The PIN is used on the signature page of the income tax return during the e-filing process.
When e-filing, enter your Current Year PIN, a five-digit number you make up during the final stages of tax prep, on the signature page. Keep this number in a safe place because you will need it for next year.
Then enter either your last year’s Adjusted Gross Income (AGI) from your federal taxes OR your last year’s PIN number to verify your prior year information.
Your Prior Year PIN is the PIN you used while filing last year’s income tax return.
What if I don’t remember my PIN and I don’t have access to last year’s AGI?
If you don’t have either of these pieces of information, request your prior year PIN from who you filed your taxes with last year. If you are required to make a new PIN, enter it in the box that says Prior Year PIN. Make sure to check the box that says Alternate PIN. Make sure the numbers are correct before continuing.
