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)
“How weary, stale, flat, and unprofitable
Seem to me all the uses of this world!
Fie on’t, ah fie! ‘tis an unweeded garden
That grows to seed, things rank and gross in nature
Possess it merely.”
—William Shakespeare (1564–1616)
“I know everybody’s income and what everybody earns,
And I carefully compare it with the income-tax returns;”
—Sir William Schwenck Gilbert (1836–1911)