The Internal Revenue Service (IRS) offers free tax filing options for eligible taxpayers. Understanding Adjusted Gross Income (AGI) is crucial for determining eligibility for these services. This guide will explain AGI and how it relates to IRS Free File.
Understanding Adjusted Gross Income (AGI)
Adjusted Gross Income (AGI) is your total income minus specific deductions, or “adjustments” to income. These adjustments reduce your taxable income.
What Counts as Income?
Gross income encompasses various sources, including:
- Wages
- Dividends
- Capital Gains
- Business Income
- Retirement Income
- Other Income (e.g., tips, rents, interest)
Common Adjustments to Income
Adjustments to income are specific expenses that the IRS allows you to deduct, reducing your overall taxable income. These can include:
- Self-Employment Tax (one-half)
- Self-Employed Health Insurance Premiums
- Contributions to Traditional IRAs
- Student Loan Interest Paid
- Educator Expenses
Finding Your AGI
You can find your previous year’s AGI on line 11 of Form 1040. This information is essential for accessing IRS Free File.
AGI and IRS Free Tax Filing Eligibility
IRS Free File provides two primary options: Guided Tax Software and Fillable Forms. Eligibility for Guided Tax Software, which offers more assistance, often depends on your AGI. For example, if filing as Married Filing Jointly, a combined AGI below a certain threshold (e.g., $84,000) may be required. Check the IRS website for current AGI limits.
Important Note: For Married Filing Jointly status, the AGI requirement applies to the combined income of both spouses.
Calculating Your AGI: An Example
Let’s say Bob has the following income:
- $50,000 Salary/Wages
- $12,000 Rental Income
- $8,500 Uber Driver Income
- $500 Bond Interest
Bob’s Gross Income: $71,000
He also has these adjustments:
- $250 Educator Expenses
- $2,500 Student Loan Interest
Bob’s Total Adjustments: $2,750
Bob’s AGI: $71,000 – $2,750 = $68,250
Knowing your AGI is crucial for determining your eligibility for Internal Revenue Service Free Tax Filing options. Visit the IRS website for detailed information and to access Free File services.
Refer to the IRS Form 1040 Instructions, Schedule 1 for a comprehensive list of adjustments to income.
