The adjusted gross income is one of the ways for the Internal Revenue Service to understand your revenue for the tax year.
There are income requirements for certain tax deductions and credits, but the income earned during the tax year doesn’t always reflect how much the taxpayer has in hand. Therefore, the IRS uses the adjusted gross income to figure out eligibility.
Your adjusted gross income is an important factor that affects tax liability as it can limit the amount you can claim in certain deductions and credits.
As for how to calculate your adjusted gross income in 2022 for the 2021 taxes, it isn’t any different from previous years.
Use Schedule 1 to figure out AGI
Schedule 1 or Additional Income and Adjustments to Income is the tax form used for figuring out adjusted gross income. The adjustments you make to your income using this tax form aren’t precisely deductions. Therefore, you can claim them with the standard deduction.
While you can take these adjustments on your federal income tax return, they will work the same way as any other deduction – reducing your taxable income.
These adjustments are significantly different from other deductions, such as the standard deduction or itemized deductions, because they will help you qualify for further deductions and credits.
How to fill out Schedule 1?
The tax form used for calculating adjusted gross income is the same as other tax forms like it. You’ll start with your gross income, the income you earned during the year, and reduce it by writing off the expenses that qualify under adjustments.
After entering all your qualified expenses, you can then subtract all of them from where you started, and the result will equal your adjusted gross income. It’s important to remember that you will use your adjusted gross income throughout your federal income tax return and other tax forms. Make sure to save Schedule 1 and start off preparing your return with these kinds of tax forms.