Business, Legal & Accounting Glossary
In the US, the difference between the gross income of a tax payer and the adjustments to income.
Adjusted gross income is the amount of income used on IRS Form 1040 to calculate a person’s income tax<tax liability. The adjusted gross income is an individuals income (wages, interest, dividends, capital gains/losses, etc.) less various adjustments (IRA contributions, alimony paid, etc.). Adjusted gross income is calculated before the itemized or standard deductions, exemptions, and credits are taken into account. Adjusted gross income is recorded at the bottom of the 1040 form. Adjusted gross income is also used to determine an individual’s eligibility for various tax benefits and exemptions. Adjusted gross income is used on many non-IRS forms as a true measure of an individual’s income. Most state forms use the federal adjusted gross income figure to reflect an individual’s income for state taxes.
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This glossary post was last updated: 4th February, 2020