Calculate Your Adjusted Gross Income With These Quick Questions

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This story has been updated to reflect the 2013 tax year.

While doing taxes can be a chore (even for us), there’s something the government does that can make it a little more bearable: It doesn’t tax us on our whole salary.

Couple doing taxesWe report our income, but then the government subtracts various things from it, like our education expenses or IRA contributions, to finally arrive at the amount that it will actually tax us on. That amount is called the Adjusted Gross Income, or AGI.

So, where do we do all these subtractions? Right on the main tax form, the 1040 (you can download one here). Here’s what that section looks like:

AGI 2013

The amounts in lines 23 to 35 will be subtracted from your income to calculate how much income you’ll be taxed on. These are called your “above the line” deductions because they are above the literal line just underneath your Adjusted Gross Income. There’s another type of deduction known as “below the line.” For now, the above the line deductions are important because they apply to every person who files taxes, whereas below the line ones only apply to some.

Above the line deductions are also important because the IRS and some states use them to decide the rate at which you are taxed. You can claim above the line deductions for expenses like student loan interest, contributions to an IRA or contributions to a health savings or flexible spending account. Read on to find out if any of them apply to you.

Many of these items require you to fill out a separate form for that specific deduction and file it along with your tax returns, so we’ve linked to them here so you can print out the forms that you need as you go. Ready to get started?

Above the Line Deductions

Are you a K-12 teacher? (Line 23)

If you are a K-12 teacher, principal, counselor or aide who worked for at least 900 hours during the school year, you can deduct up to $250 (or $500 if you file jointly and your spouse is also a qualified educator) for books and supplies that your employer didn’t reimburse you for. Enter the amount on this line, up to the maximum allowed.

Are you in the National Guard, a fee-based government official or a performing artist? (Line 24)

If so, fill out Form 2106. Enter the final number here. (A “fee-based government official” is someone who performed services as a state or local government employee and was paid entirely or in part on a fee basis.)

Do you have a health savings account? (Line 25)

If you have a health savings account (HSA) that is not part of a retirement plan, fill out Form 8889.

Note: This form tells you to fill out Form 8853 if you have an Archer HSP or a Medicare HSP. If you aren’t sure what kind of health care plan you have, but you know that your employer offers one, the 8853 Instructions explain qualified health care plans in depth and is a good place to look if you have questions about whether or not your health care plan qualifies for tax breaks.

Have you moved for a new job in the last year?

 (Line 26)

If you have moved sometime in the last tax year because of a new job, this deduction may apply to you. Your new home must be at least 50 miles away from your old home.

Note: The IRS calculates this by subtracting the number of miles from your old home to your old workplace from the number of miles from your old home to your new workplace. If that number is 50 or more, then you can apply for this deduction by filling out Form 3903.

Are you self-employed, have you received tips or wages, or are you a church employee who received payment for your services? (Line 27)

We recommend going to Schedule SE, and completing that before filling in this line. On the form, the IRS carefully explains who needs to fill out Line 27. Put the final number that you calculate from that form into this item.

Do you have a SEP, SIMPLE or retirement plan other than an IRA? (Line 28)

If so, we recommend reading over Pub. 560 for an in-depth description of who can use these deductions. The chart on the second page of this publication is extremely helpful to figure out how much can be deducted.

Are you self-employed with health care under that business?

 (Line 29)

If you own your own business and you have health care under that business, you should fill in this line. The insurance plan must be established under the business. Tally up your total premium payments for the year and deduct that number here. If you aren’t sure what your total premium payments are, they should be listed in your W-2.

Have you withdrawn from a retirement account, bond or CD? (Line 30)

If you have withdrawn from your retirement account, bond, CD, etc. and have had to pay an early withdrawal penalty, you need to fill in this line. You should use Form 1099-INT (the form you use to report interest income), to come up with the number you need. The number in Item 2 on this form is the dollar amount of your early withdrawal penalty. Put this amount in the line for Item 30 on your 1040.

Have you paid alimony? (Line 31a and 31b)

If you have paid alimony (not child support), you should fill in the amount you have paid, along with the Social Security Number of the person you paid it to.

Have you have made contributions to a traditional IRA? (Line 32)

This is a big one. If you have made contributions to a Traditional IRA (not a Roth!) this year and you have an earned income (this includes things like wages, salaries, tips, etc.), you should fill this out.

Note: There are limits on how much of that contribution is deductible. If you are covered by a retirement plan at work, this chart spells it out clearly for you. If you are NOT covered by a retirement plan at work, look at this chart for an explanation. If you aren’t sure if you are covered by your employer, box 13 on your W-2 will tell you.

Do you have a student loan? (Line 33)

You can deduct up to $2,500 for the interest you paid on your student loan last year. If you did, you should have received a form 1098-E from the entity to which you paid interest. Do you fit these qualifications?

  • You are not filing under the status “married filing separately”
  • Your AGI is less that $75,000 if you’re single and $150,000 if you’re married
  • You can’t be claimed as a dependent on your parents’ tax returns

Are you a student? (Line 34)

Do you fit all of these qualifications?

  • You’re a student
  • You are not filing under the status “married filing separately”
  • Your AGI is less than $75,000 if you’re single and $150,000 if you’re married
  • You can’t be claimed as a dependent on your parents’ tax returns

If all the above are true, then you should fill out a 8917 Form. If you still aren’t sure, read the form to find out the exact requirements.

Note: You can’t use both this deduction and education credits for the same student in the same year, so you should compare the tuition fees deduction to education credits for which you qualify to determine which one will give you the bigger break. The IRS explains.

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Have you produced a tangible product? (Line 35)

Yes, we realize that is an oddly phrased question. This is what it really means. You need to fill out Form 8903 if you have:

  • Produced real estate
  • Provided architectural or engineering services
  • Sold, leased or produced film or audio recordings
  • Sold, leases or produced electricity, natural gas or water

Additionally, make sure you fall under these qualifications.

  • If your product was electricity/natural gas or water, you must have produced or extracted it—distributing it or transmitting it does not apply.
  • You produced the product, instead of just selling food and beverage at a retail establishment. (For example, while the companies Frito-Lay or Coca-Cola can claim this deduction, restaurant owners cannot.)
  • If selling, leasing or distributing a tangible product, that product cannot be land.
  • It must have been produced, sold or leased in the U.S.

Adding It All Up

You’re almost done! Now just add all of your deduction amounts together and enter the total on line 36. Then subtract line 36 from line 22 (your income). Congrats! You have calculated your adjusted gross income.

If you’re worried about making a mistake, we like this 1040 tax calculator, which will help you add up your income and walk you through the adjustments you might be eligible for.

More on Taxes From LearnVest

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Getting audited is no fun. Find out what the top IRS audit triggers are.
You might have heard about the dreaded Alternative Minimum Tax. Could you be hit with it?

Navigate Your Taxes

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  • Abby

    It says you can claim a deduction if you contribute to a HSA. Can I also claim deductions for contributions to a Flex Spending Account (FSA) that is supplemental to my primary health insurance?