Adjusted Gross Income

 AGI is the short form of adjusted gross income, is a tax term used in United States for the amount which is utilized in the computation of one’s income tax liability. Adjusted gross income is computed by taking the gross income of an individual and then subtracting the income tax code’s itemized adjustments. It is one of the important standards which are utilized in finding out certain other permitted benefits. For instance most of the limitations on credits or deduction are estimated based on either MAGI (modified adjusted gross income) or AGI. Gross income comprises dividend income, interest income, wages, and income from some of the retirement accounts, alimony received, unemployment compensation, capital gains, rental income, farm income, royalty income, and various other types of income.

Adjusted gross income in Divorce

Although alimony is a tax deduction- a deduction from income- it is better than from a tax perspective.  Alimony, as to the payer, is a deduction from gross income incoming at the adjusted gross income. This can be far as superior to merely another itemized deduction. As a consequence, it helps to reduce that all-important adjusted gross income figure upon which much of the recent tax changes are based. For example, the limitation on miscellaneous itemized deduction is based on those deductions exceeding two percent of one’s adjusted gross income. Alimony, as an item that reduces adjusted gross income rather than as an item of itemized deduction, is not only excepted from that two percent limitation but also reduces the base upon which the two percent limitation is calculated.

More important, this aspect can be quite beneficial to higher-income tax payers subject to the 36 percent tax bracket and in addition, a phase-out of itemized deductions and the dependency exemptions.

Questionnaire:

• What is adjusted gross income?
• What are the uses of adjusted gross income?