This link is to make the transition more convenient for you. You should know that we do not endorse or guarantee any products or services you may view on other sites. Tax information center : Income : Other income. What is MAGI? Gross Income — This is the money you earn from all sources, including wages, tips, investment income, pension or rents.
Adjusted Gross Income — This is your Gross Income with certain allowable deductions subtracted but does not include the standard or itemized deductions or any exemptions. However, it can be calculated using information from your Form Your modified adjusted gross income is a subset of your total income. Your total income consists of all types of earnings you received during the year, such as wages, salaries, tips and commissions.
Total income also includes IRA and pension distributions, rental income, alimony received, dividends and interest, Social Security benefits, taxable refunds, farm income, unemployment compensation, business income and capital gains. You can find your total income on line 22 of your Form Your adjusted gross income takes your total income and tweaks it slightly by subtracting certain deductions allowable by the IRS.
You can find the allowable deductions on the first page of your Form , under the section marked "Adjusted Gross Income. Certain education-related tax benefits and income tax credits are based on MAGI. In , the American Rescue Plan allowed more households to access subsidized health insurance through the Marketplace.
In tax years and , you may be eligible for new tax credits that lower the cost of your Marketplace health insurance, even if your MAGI was too high to qualify in previous years. You will still need to file taxes at the end of the year to prove that your income was not too high for the tax credit. The first thing to know is that your total income, modified adjusted gross income, and adjusted gross income AGI are not the same things.
Though they use most of the same base numbers, each is calculated in a slightly different way. For tax-planning purposes, you will need to learn the differences and when to use each one. Your AGI is the total amount of income you make in a year, minus certain expenses that you are allowed to deduct.
Adjusted gross income is your taxable income for the year, so it is what your income tax bill is based on. There are two steps to finding your AGI. First, it includes all your income sources, such as:. The total amount of income is then "adjusted. These may be:. The Internal Revenue Service uses your adjusted gross income as a starting point to calculate your total income tax and to determine whether you can claim many credits and exemptions on your taxes, such as:.
The American Rescue Plan also expanded eligibility for the earned income tax credit. It can now be claimed by:. You don't need to add to your AGI any pre-tax contributions made to employer-sponsored plans such as a k. The lower your AGI, the lower your tax bill will be. That means it's often in your best interest to lower your AGI as much as possible.
Want an easy way to estimate your MAGI? Want to compound your investing wisdom? Find Out More. Learning Library Book Notes Quotes.
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