While researching how to determine my marginal tax rate, I came across the term "taxable income".
Is "Adjusted Gross Income" (AGI) the same thing as "taxable income"?
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This can be confusing, but I did find an article that tries to Make Sense of Income and Tax Terms You should ignore line numbers, because they can change every year.
You first start with your total income that is all your salary, interest, dividends, priors years tax refunds, capital gains, IRA distributions. This number already has your health insurance premiums, 401K and HSA contributions removed from your salary.
Then you calculate Adjusted Gross Income by subtracting some items including moving expenses, teacher supply expense, student loan interest, IRA contributions. these are special deductions that Congress wants everybody to be able to claim even if they don't itemize.
To calculate Modified Adjusted Gross Income then add back in the student loan interest and IRA deposits to establish how much of those amounts are truly deductible.
Taxable income is your AGI minus deductions (itemized or standard) and personal exemptions.
This amount then goes into the tax table or formula to determine how much tax you should have paid.
There are also tax credits for number of children, child care, college tuition... that need to be considered.
No. There are additional credits (such as itemized or standard deductions and personal exemptions) against AGI that result in a different "taxable income".
Extra credit (line numbers confirmed on 2012 forms)