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Adjusted Gross Income

29.01.2011 06:56:40

Adjusted Gross Income Definition

Gross income is defined based on your salaries, compensations, interests and dividends, royalties. If your income is higher than the set limit, you can also get benefits from the Social Security program, which will be included to your gross income. The items that aren’t taxable and are deducted from the gross income are the interests you get from local or state securities, public assistance and more.

Adjusted gross income is based on the gross income with the following deductions: IRA payments, health insurance payments , transportation and moving expenditures, penalties, alimony payments and other expenses.

Modified Adjusted Gross Income

Many people confuse adjusted gross income (AGI) with modified adjusted gross income (MAGI). However, these terms have a few differences. The MAGI is indeed similar to the AGI with a few factors that must be taken into account. These involve profits and losses that aren’t directly related to your work activity, interests you get from your student loans , educational fees, self-employment tax, Social Security that is eligible to taxes, IRA, etc. These are the main reasons why modified adjusted gross income is higher than AGI, but is of a fewer value than the gross income.

MAGI plays a significant role due to the fact that it determines your eligibility to get some tax benefits that include tax deductions from IRA payments , Social Security payments, etc. In case your modified adjustable gross income is of a high amount, you will most likely be illegible.

Define Gross Income

If you need to define gross income , you will have to account your adjusted gross income first. The gross income represents the total amount that you get during a certain period of time. The items that are usually included to the gross income are as follows:
  • Wages and salaries
  • Unemployment payments
  • Social Security payments
  • Alimonies
  • Property rentals
  • Interests and dividends
  • Profits from bonds and securities
There are a few income sources that do not qualify as the gross income. They include:
  • Benefits you get from assisting public organizations
  • Money received from tax-free state and local bonds
If you need to define your adjusted gross income, calculate your gross income and exclude such adjustments as:
  • Moving expenses
  • Alimonies paid
  • Education expenses
  • Health insurance payments
  • Student loans’ benefits
  • IRA payments


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