Your Adjusted Gross Income (AGI) is a preliminary tax return calculation the IRS requires before arriving at your final taxable income. It’s best to calculate your AGI with accurate income information such as a W-2 or 1099, but it’s possible to calculate it with just your pay stub. However, it’s only feasible if the wages your paystub reports is the same for all payroll periods, or you have your final paystub for the tax year that reports cumulative wage information.
Calculate gross wages for each job. Multiply your gross wages from each paystub by the number of weeks you work during the year to arrive at your annual earnings. If your paystub reports your cumulative earnings for the year, you can use that total instead. Perform this calculation for each paystub you have, if you had different employers in the course of the year.
Calculate gross income. The first section of your tax return requires you to calculate your gross income in order to calculate your AGI. Add your annual wages from each paystub together to arrive at your gross income. However, you must also include other types of income you earn that don’t relate to your jobs. This can include the interest from bank accounts, income that you earn from investments, alimony payments you receive from a former spouse as well as taxable IRA distributions you received.
Claim adjustment to income deductions. The IRS provides a number of deductions each tax year that directly reduce your gross income. If you satisfy the requirements of each specific deduction, you are eligible to claim it regardless of whether you itemize your other expenses or claim the standard deduction. The types of deductions available are subject to change each year due to frequent tax law amendments, but they commonly include the out-of-pocket expenses of educators, deductions for the contributions you make to health savings and certain retirement accounts, student loan interest and a deduction for the penalties your bank charges when making an early withdrawal from your savings.
Subtract adjustments to income from your gross income. After calculating your total gross income and total adjustments, subtract the adjustment total from your gross income to arrive at your AGI.
Tips
If you receive other forms of compensation from your employer, such as a taxable tuition reimbursement, your paystub may not reflect this payment. However, you must include this amount in your gross income to accurately calculate your AGI.
Warnings
If you don’t choose to file your tax return on the 1040 long-form, the IRS significantly limits your ability to claim deductions in the adjustments to income category. No deductions are available if you file on a 1040EZ and your AGI will equal your gross income. If using a 1040A, only a small number of the deductions are available to you.
References
- IRS: Publication 17 - Your Federal Income Tax (Parts 2 and 4)
- Internal Revenue Service. "Publication 5307: Tax Reform Basics for Individuals and Families," Page 7. Accessed Nov. 30, 2019.
- Internal Revenue Service. "Revenue Procedure 2018-57," Page 16. Accessed Nov. 30, 2019.
- Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2020." Accessed Jan. 20, 2020.
- Internal Revenue Service. "Publication 525: Taxable and Nontaxable Income." Accessed Nov. 30, 2019.
Tips
- If you receive other forms of compensation from your employer, such as a taxable tuition reimbursement, your paystub may not reflect this payment. However, you must include this amount in your gross income to accurately calculate your AGI.
Warnings
- If you don't choose to file your tax return on the 1040 long-form, the IRS significantly limits your ability to claim deductions in the adjustments to income category. No deductions are available if you file on a 1040EZ and your AGI will equal your gross income. If using a 1040A, only a small number of the deductions are available to you.
Writer Bio
Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.