28 Sep 2022


What is Adjusted Gross Income (AGI)?

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Academic level: College

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Question One

Adjusted Gross Income (AGI) is the amount that is subject to deductions for all expenses that are non-taxable throughout the year. In other words, the taxable amount is achieved after subtracting allowable exemptions and deductions. Thus, AGI is determined by some qualifying credits and the higher the AGI, the more taxes to be paid. Some of the deductions include business expenses, alimony payments, moving payments and health savings account.

Question Two

In this case, the net deductions will be AGI subtracting the deductible expenses.

$75,000 – (500+600+800) = $73,100

Question Three

A married couple is on the tax deduction of 35% and will have the current year deduction of $4060 on a mortgage in point at closing and $4200 on the mortgage on interest.

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Question Four

The student’s loans interest is adjustable on AGI but only for qualified higher education. However, the adjustment of education loan is different from that of tuition and fees. Adjustments for Tuition and fees are possible for the claimed qualified education expenses rather than credits. Student loan interest deduction is claimable when the AGI is less than $80,000, and the claimable amount is $2500.

Question Five

The selling amount is $32,000 and cost of $30,000. Thus, the gain is $32,000 less $30,000, and the gain is $2,000. Additionally, less the previously disallowed loss of $30,000 less $38,000, therefore the taxable gain is zero ($0).

Question Six

In this case, the only interest deductible is $850 from net income of the investment. On the other hand, interest on the loan for personal use, personal credits cards, service charges, and interest on tax fees does not qualify for a deduction of interest expense.

Question Seven

Adjusted gross income is the total of individual’s total income fewer expenses relating to the income. For instance, expenses on rent will be deducted from rental income. Therefore, the adjusted gross income will be equal to ($15,000 + $13,000 + $5,000) - ($2,500 + $200 +$2,300 + $900) = $33,900

Question Eight

After the non-cash donations are made to the charitable organization, substantiation how the contribution will be used in not necessary. In this case, charity organizations are deemed to be a separate legal entity.

Question Nine

The set of tax deductions that are made on individuals’ income tax return is called adjustment to income as indicated on Form 1040. It is after these deductions that adjusted gross income is achieved which are further subjected to standard or itemized deductions. The qualifying deductions include professional expenses, students’ loan interest, tuition and fees, moving expenses, IRA contributions, and alimony payments.

Question Ten

In Jennifer’s case, the only expense that is deductible is $900 for mortgage interest. Thus, tax and insurance expense do not qualify since the land does not have capital gains but rather it has underlying mortgage financing.

Question Eleven

When carrying over the charitable carryovers, the total contribution should not exceed 50% of the current Adjusted Gross Income. The carry over is subjected to the same percentage as the current year. Thus, the 2017 charitable contributions will be equal to 31,000/60,000*60000 = $31,000.

Question Twelve

Recognized losses occur when the stock is sold at a less price, and for tax requirements, it is carried forward in future. Recognized gains resulted in capital gains on the stocks and reported in the income tax. In this case, the selling price is $67,000 less cost of $60,000 thus the gain of $7,000. Further, subtract the previously disallowed loss from gain to get recognized gain $7,000- ($60,000-$66,000) = $1,000

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StudyBounty. (2023, September 14). What is Adjusted Gross Income (AGI)?.


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