How to Calculate AGI from W2

AGI is the term used for Adjusted Gross Income. It’s basically your taxable income. There are many ways to calculate this, so how to calculate AGI from a W2?

2021 tax season is ahead of us. Although there are a few tax changes here and there, the way you will calculate your AGI from a W2 will always be the same. Adjusted Gross Income is determined by taking out adjustments and deductions from the gross income. It is as simple as that.

If you’re a worker who worked for an employer, you will receive a Form W2 by January 31st. You will use your W2 to file your federal income tax return. The most important information provided on your Form W2 is going to be your total gross income which can be found on Box 1 stated as wages, tips, other compensation.

Assume the amount shown on Box 1 which is your gross income is $50,000. You will make adjustments to this income and subtract the adjustments and deductions you’re eligible to claim. If you earned additional income such as interest, miscellaneous income, distributions, etc. make sure to add the total amounts to your gross income.

Figuring Out AGI to Find Taxes Owed

Assuming your only source of income is W2, here is how to figure out AGI using Form W2—Wage and Tax Statement.

  1. Add other income earned to your gross income found on Box 1 of Form W2.
  2. Calculate the total amount of adjustments you can make your to your income using Schedule 1.
    • You can also use Schedule 1 to report the additional income you’ve earned. This is mostly for the income you’ve earned but not reported.
  3. Subtract the total adjustments from your gross income.
  4. Now, calculate the deductions you’re going to claim on your tax return. If you’re going to take the standard deduction, subtract it from the amount you’re eligible depending on your filing status.
    • Whether or not you’re anticipated to take the standard deduction, you should always calculate your itemized deductions. If you can claim more in itemized deductions, itemize. If not, take the standard deduction.
  5. What you’re left with after subtracting the adjustments and deduction(s) from your gross income is your Adjusted Gross Income.

This is as simple as it goes when calculating the AGI from W2. Once you know your taxable income, you can then find the tax rate that applies to you and find your tax liability.

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