Your adjusted gross income plays a large role when calculating your income tax liability for the year. Generally, your AGI includes all your gross income, including wages, dividends, pensions, unemployment compensation and self-employment income, minus any adjustments. Adjustments reduce your income and lessen your tax burden. The Internal Revenue Service uses your AGI to calculate several tax credits and bases numerous deductions upon a percentage of your AGI.
Although it is difficult to figure your exact AGI off an hourly wage, you can calculate an estimate of what your AGI should be at the end of the year using one of several tools, including an adjusted monthly income calculator.
Finding Your Gross Income
You can estimate your adjusted gross income from an hourly wage by first calculating your total gross income. You can start by determining the estimated number of hours you work in a year, noting that there are 52 weeks in a year.
For example, if you work 40 hours per week with a $25 an hour salary, your total annual hours is 2,080, or 40 hours times 52 weeks. You can also start on a more manageable level by calculating how much you make a week. For example, an hourly wage of $12.50 times 40 hours a week is $500.
Multiply your total annual hours by your hourly wage to determine an estimate of your gross income. Using the previous example, if you work 2,080 hours per year and receive $20 per hour from your employer, your gross income is $41,600, or 2,080 times $20. You can also complete the same process using an adjusted monthly income calculator.
Looking For Additional Income
If you have any income other than your wages from your job, such as income from a small business, income from a second job or your spouse's income, then add that to the total. If you also expect to profit $125,000 from your small business, for example, add this amount to your gross income. Using the previous example, your total gross income is $166,600, or $41,600 plus $125,000.
Your total gross income can be reduced by certain adjustments to arrive at your adjusted gross income. Some of the adjustments that can be deducted from your gross income include:
- $250 for qualified educator expenses
- Up to $2,500 for student loan interest
- Alimony paid during the tax year
- Mortgage interest deduction, typically for all the interest you pay up to $750,000 for your qualified primary residence and even a second home
- Contributions made to IRS-qualified charities
- Eligible medical expense that exceed 7.5 percent (or 10 percent for 2019 tax year) of your adjusted gross income
Once you've determined the adjustments you can take, add them together and subtract them from your gross income to determine your estimated AGI. Using the previous example, if your adjustments are $14,200, your AGI is $152,400, or $166,600 minus $14,200.
Reporting Your Income
You will report your AGI on the standard IRS Form 1040. Using this form, you can take advantage of any and all deductions you may have qualified for.
- Internal Revenue Service: Definition of Adjusted Gross Income
- Internal Revenue Service: Publication 17 – Adjustments to Income
- Society for Human Resources Management: President Signs Tax Bill Altering Employee Benefits
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- The Motley Fool: Your 2019 Guide to Tax Deductions
- If you do not qualify for adjustments to your income, your estimated AGI is your total gross income.
Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.