Adjusted Gross Income
Adjusted Gross Income (AGI) is an individual’s total gross income minus certain deductions. It is used to calculate an individual’s tax liability. AGI is reported on IRS Form 1040 and is used to determine eligibility for certain tax credits and deductions. AGI is also used to calculate the amount of Social Security benefits an individual is eligible to receive.
History of Adjusted Gross Income
The concept of Adjusted Gross Income was first introduced in the Tax Reform Act of 1986. Prior to this, the Internal Revenue Service (IRS) used a different system to calculate an individual’s taxable income. This system was based on the individual’s total income minus certain deductions, such as business expenses, charitable contributions, and medical expenses. The Tax Reform Act of 1986 changed this system and introduced the concept of Adjusted Gross Income. This new system allowed individuals to deduct certain expenses from their total income before calculating their taxable income.
Comparison of AGI to Other Income Types
Income Type | Calculation |
---|---|
Gross Income | Total income before deductions |
Adjusted Gross Income | Gross income minus certain deductions |
Taxable Income | AGI minus certain credits and deductions |
Summary
Adjusted Gross Income (AGI) is an individual’s total gross income minus certain deductions. It is used to calculate an individual’s tax liability and is reported on IRS Form 1040. AGI is also used to determine eligibility for certain tax credits and deductions, as well as the amount of Social Security benefits an individual is eligible to receive. For more information about AGI, visit the IRS website or consult a tax professional.
See Also
- Gross Income
- Taxable Income
- Tax Reform Act of 1986
- Tax Credits
- Tax Deductions
- Social Security Benefits
- IRS Form 1040
- Tax Professional
- Tax Planning
- Tax Preparation