For United States individual income tax, adjusted gross income (AGI) is total gross income minus specific reductions. Taxable income is adjusted gross income minus allowances for personal exemptions and itemized deductions. For most individual tax purposes, AGI is more relevant than gross income.
Gross income is sales price of goods or property, minus cost of the property sold, plus other income. It includes wages, interest, dividends, business income, rental income, and all other types of income. Adjusted gross income is gross income less deductions from a business or rental activity and 21 other specific items.
Several deductions (e.g. medical expenses and miscellaneous itemized deductions) are limited based on a percentage of AGI. Certain phase outs, including those of lower tax rates and itemized deductions, are based on levels of AGI. Many states base state income tax on AGI with certain deductions.
Read more about Adjusted Gross Income: Gross Income, Adjustments, Reporting On Form 1040, Modified AGI
Famous quotes containing the words adjusted, gross and/or income:
“The lover of nature is he whose inward and outward senses are still truly adjusted to each other; who has retained the spirit of infancy even into the era of manhood.”
—Ralph Waldo Emerson (1803–1882)
“The gross feeder is a man in the larva state; and there are whole nations in that condition, nations without fancy or imagination, whose vast abdomens betray them.”
—Henry David Thoreau (1817–1862)
“Work though we must, our jobs do not automatically determine our priorities concerning our marriages, our children, our social life, or even our health. It’s still life, constrained as it may be by limited disposable income or leisure time, and we’re still responsible for making it something we enjoy or endure.”
—Melinda M. Marshall (20th century)