Taxable income: Taxable income is arrived at by subtracting thestandard or itemized deductions—whichever amount is greater—from your AGI. Take note of the nuances between AGI vs. taxable income: These two tax terms are commonly intertwined but represent different things. Long story short, you...
According to the IRS, modified adjusted gross income (MAGI) is generally equal to AGI before student loan interest is deducted. MAGI helps determine eligibility for things like Medicaid, premium tax credits, and savings on marketplace health insurance plans and the Children’s Health Insurance Progr...
For example, calculating MAGI can also include adding back in the deduction for half of the self-employment tax paid or any non-taxable Social Security benefits. » Dive deeper: How to calculate modified adjusted gross income Article sources NerdWallet writers are subject matter authorities who ...
because many states use your federal AGI as the starting point for calculating your state taxable income. And if you claim a tax credit, such as the lifetime learning credit, for your school expenses, the IRS requires that your MAGI be below certain thresholds in order to claim the credit....
A traditional IRA is an individual retirement account with tax benefits: Contributions can cut taxable income, giving tax breaks now while saving for later.
Through 2017, each dependent you claim on the return allows you to reduce your taxable income by a set exemption amount. For example, if during 2017 you have two minor children who you are able to claim as dependents, claiming both of them allows you to take two exemptions. These ...
Traditional IRA: Contributions to a traditional IRA may be deductible from your taxes, thus reducing your taxable income for the year. The deduction amount is based on your income, tax filing status, and whether you (or a spouse, if filing jointly) have access to a workplace retirement plan...
2. You plan to also realize some losses If you realize a loss on an investment, you can use it to offset your taxable capital gains and potentially lower your ordinary income by up to $3,000. So, if you plan to lock in some losses this year, you could also realize an equal amount...
What Is Taxable Income? Taxable income is the portion of your gross income used to calculate how much tax you owe in a given tax year. It can be described broadly asadjusted gross income (AGI)minus allowable itemized or standard deductions. Taxable income includes wages, salaries, bonuses, an...
Your AGI will always be less than or equal to your gross income. What Are Some Common Adjustments Used When Determining AGI? Most are tax breaks that reduce your taxable income. One big one is an adjustment for student loan interest. Others are more specialized, such as an adjustment for ...