- Formula for Calculating Adjusted Gross Income
- Do Roth IRAs Affect Your Adjusted Gross Income?
- How to Calculate Adjusted Gross Income With an Hourly Wage
- Where Can I Find My Modified Adjusted Gross Income on My Taxes?
- What's the FAFSA Adjusted Gross Income Ceiling for Parents?
- What Level of Adjusted Gross Income Does the Alternative Tax Factor In?
Your total income minus any allowable additions or deductions equals your adjusted gross income. This number affects many of your allowable itemized deductions on your Form 1040, Schedule A, such as medical and dental expenses, miscellaneous expenses and employee business expenses. Since these deductions are subject to a minimum of a certain percentage of your adjusted gross income, reducing this number may allow you to take a higher deduction, saving you even more on your taxes.
Contributions to a 401k plan are deducted from the income reported to you on your yearly W-2 form. These contributions directly reduce your adjusted gross income. In addition, contributions to a traditional deductible individual retirement account do the same. Roth IRA contributions are not tax deductible and therefore have no effect on adjusted gross income.
A health-care savings account is similar to an IRA account, except it isn't primarily for retirement savings. If you purchase your own high-deductible health insurance plan, you are eligible for an HSA. Money can be used from the HSA to pay for medical expenses that are below your deductible amount. Any contribution to the HSA is tax deductible, reducing your adjusted gross income.
If you are divorced and required to pay your spouse alimony, the alimony you pay is deductible from your income and will reduce your adjusted gross income. Child support is different; it is not deductible from your income as an adjustment.
Be aggressive in deducting business expenses. If you can document the deduction, make sure you take it. Self-employment income adds directly to your adjusted gross income, so reducing it by claiming all potential expenses will lower the amount. In addition, a business loss is subtracted from your adjusted gross income. Structure your expenses to provide the maximum reduction in the year that you need it.
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