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 treatment of the incident of the assault upon the sailors of the Baltimore is so conciliatory and friendly that I am of the opinion that there is a good prospect that the differences growing out of that serious affair can now be adjusted upon terms satisfactory to this Government by the usual methods and without special powers from Congress.”
—Benjamin Harrison (1833–1901)
“In the gross and scope of mine opinion,
This bodes some strange eruption to our state.”
—William Shakespeare (1564–1616)
“We commonly say that the rich man can speak the truth, can afford honesty, can afford independence of opinion and action;—and that is the theory of nobility. But it is the rich man in a true sense, that is to say, not the man of large income and large expenditure, but solely the man whose outlay is less than his income and is steadily kept so.”
—Ralph Waldo Emerson (1803–1882)