adjusted gross income is; subtracting all the expenses in your gross income, and the remaining balance — is your adjusted gross income . which helps you to pay, low taxes on your total income. instead of paying high taxes.
clear definition
if your having multiple incomes (or) single income . and your income expenses; are above-the-line deductions. so you want to have proof, of that expense: such as your bills, statement extra …
when people ask me; what is above-the-line deduction? suppose, in your income —- if your expense is more the standard deduction. then your deduction is above the line.
however, above-the-line deductions help you to pay low taxes. how did above-the-line deduction, help to pay the low tax; on your income?
moreover, if your expense is, more than the standard deduction. than your income; will be very low. if your income is — low. than your income tax is also low. adjusting the expense above the line is called as; adjust gross income.
I think you understand clearly; now. so, in the coming heading . you’ll understand adjusted gross income; with examples. end of the article: you will know better —- how to calculate adjusted gross income . on your own; gross income.
adjusted gross income example; business
for instance you running a business, and have a different multiple income. such as work income, property income, car rent income, real estate income, etc…
let’s take your total income of $ 100,000 per year Your standard deduction is 50,000$, and your expense is $70k. so now what is your adjusted gross income; in your total gross income?
if you minus the 100,000 dollars income, by 70,000 dollars expense. then your adjusted gross income is 30,000 dollars. so before paying taxes. you have to to prove your; above-the-line detection.
through some type of statement, bills, invoice, etc… after submitting all the proof documents. you can pay— your AGI tax for 30000$.
so in this example, some people are confused. about, above the line, and below the line deduction. however to make clear about; this. let’s take a deep look at, above-the-line vs below-the-line deduction.
above the line vs below the line
let’s say you have an income of 40,000$, and the standard deduction is 20k$. so first of all, suddenly most people; start to ask, what is standard deduction?
if you have a particular income. then every government has a certain; deduction limit for certain income. It is called a standard deduction. so, check that in your own country. Internal Revenue Service (IRS) website.
it will help to find the real standard deduction; on your total income. specifically for the standard deduction. I just gave myself a standard deduction —- limit on this example.
in this example, we have a standard deduction of 20k$.and gross income is $40,000. if your expense is less than; twenty thousand dollars of standard deduction. then it is called, below a below-the-line deduction.
suppose, your expense is more than twenty thousand dollars. then which is called an above-the-line deduction.
conclusion
this is the final example. to mix everything you learned. for instance, your gross income is 42000$. and the standard deduction in your country; is maybe 25,000$.
if you have 30,000$ expense, then you’ll pay tax on 12,000 dollars. on the other hand, if your expense is less than the standard deduction. let’s say, it is fifteen thousand dollars.
then you’ll want to pay tax on twenty-seven thousand dollars as adjusted gross income. I think, now you can understand; more clearly than before.
so if you have any doubt about adjusted gross income, then don’t hesitate to ask. feel free to contact us.