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ADJUSTED GROSS INCOME

Definition 
Adjusted Gross Income or AGI is gross income minus adjustments to income for tax purposes

Why It's Important
AGI is the portion of your income that you are taxed on.  I think the best way to explain this term is to provide an example.  

Let's say your salary is $50,000 a year.  Because you are awesome, you contribute 5% of your salary to a 401k.  To keep it simple, we will leave the salary deductions there (in real life, you will probably also deduct medical, dental, and vision benefits as well).  5% of $50,000 = $2,500 so instead of being taxed on your full (gross) salary of $50,000, you would only be taxed on $47,500 of it.  $47,500 is your Adjusted Gross Income.  

This is why participating in company-sponsored benefits plans (like medical, 401k, HSAs, etc.) are so important.  It effectively lowers your tax bill.  It is important to note that in order for your gross income to get adjusted, the benefit has to come out PRE-TAX...

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EPISODE 6 - LISTENER REQUEST: WHAT IS INCOME TAX AND HOW DOES IT WORK?

podcast taxes Aug 22, 2019

Do you know why taxes are coming out of your check every pay period?  How do they calculate it?  What is it used for?  Join Tiffany as she answers these questions and more!  This episode was a listener request!  To submit a question: join our Facebook group or fill out the form on the website and it could be featured on a future episode!
Be sure to subscribe and rate this podcast on your favorite platform!  This helps more people find us.

 

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EPISODE 5 - LISTENER REQUEST: WHAT ARE ROTH IRAS?

Always wondered about Roth IRAs?  Join Tiffany as she breaks down what they are and how to best utilize them.

This is a listener request episode.  If you want to have your question featured, please submit on our website.

 

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