ESTIMATE YOUR TAX REFUND OR LIABILITY

Free 2020 Tax Return Calculator

Our tax return calculator is designed to set you up for success; so that you know what to expect and how to structure your finances to make the most of your refund or plan for an upcoming tax payment.

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Frequently Asked Questions

FAQ

What is income tax?

Income taxes are taxes that are imposed on income generated by individuals and businesses by the government.  The United States tax system requires taxpayers to file their taxes on an annual basis in order to determine the correct tax obligation for that period.

What is my filing status?

Selecting the correct filing status when completing your income tax return can be the first important step when properly reporting your tax return. This selection can impact the tax benefits you receive, the amount of your standard deduction, and ultimately the amount of taxes you pay. To help guide you in the right direction, find each of the IRS filing statuses below along with relevant descriptions and requirements.

Single: This filing status is used by a taxpayer who is unmarried and does not qualify for any other filing status. Single filers include, according to the Internal Revenue Service (IRS), people who on the last day of the year are unmarried or are legally separated from a spouse under a divorce or separate maintenance decree and do not qualify for another filing status.

Married filing jointly: When filing as married filing jointly, both spouses are equally responsible for the return and the taxes. If either one of the spouses understates the tax due, both are equally liable for the penalties unless the other spouse claims he or she was not aware of the mistake and did not benefit from it.When filing a tax return as married filing jointly, a married couple uses the same tax return to report income, deductions, credits and exemptions.When filing as married filing jointly, your total combined tax liability is often lower than the sum of spouses' individual tax liabilities, if they were filing separately. This is because of the increased standard deduction allotted to them, in addition to other tax benefits exclusive to this filing status. You can use the married filing jointly filing status if both of the following statements are true:1. You were married on the last day of the tax year. If you were unmarried, divorced, or legally separated (according to state law) on Dec. 31, then you are considered unmarried for the year. There is an exception to this rule for the death of a spouse.2. You and your spouse both agree to file a joint tax return.In addition, if you were not divorced or legally separated on Dec. 31, you are considered unmarried if all of the following apply:1. You lived apart from your spouse for the last six months of the tax year. (not including temporary absences like business, medical care, school, or military service).2. You file a separate tax return from your spouse.3. You paid over half the cost of keeping up your home during the tax year.4. Your home was the main home of your child, stepchild, or foster child for more than half of the tax year.

Married filing separately: Married filing separately enables a separation of tax liability from your spouse. This filing status may be wise if one spouse suspects the other may be hiding income. Filing as Married filing separately may also be beneficial if both spouses have similar income levels and their combined reported results in entering a higher tax bracket. Likewise, if one spouse has significant itemized deductions that could put them in a lower tax bracket, filing separately may make sense.Note however, that filing separately will usually disqualify you from valuable tax breaks such as: The child and dependent care credit, hope and lifetime learning credits, and adoption expense credit, as well as deductions for your contributions to a Traditional IRA.

Head of household: While many single people live alone and would therefore consider themselves the head of their own household, the IRS distinguishes between a single filer and a person considered the head of a household. Head of Household status generally only applies to an unmarried person who, for the given tax year has paid more than half of the cost of maintaining a home for themselves and a qualifying person, such as a dependent.Generally speaking, the qualifying person whom a head of household lives with must be their child, parent or another type of relative. The person may be a domestic partner, as long at that partner does not earn any income, thereby making them considered a dependent.

Surviving Spouse: For up to two years after the death of a spouse, the widow(er) may continue to use the married filing jointly tax rate by filing as a qualified widow(er) with a dependent child, as long as the taxpayer hasn’t remarried.

Choices!: This should give you a better understanding of the different filing statuses and how they function based on the rules of the IRS. Take the time to weigh your options and see which status would work for you, or benefit you most this tax season. For any further inquiries please contact us via the help chat on the bottom right corner of the Taxfyle website.

When is income tax due?

The tax deadline for individuals will be April 15th, 2022.  If you still haven't filed your 2020 taxes and you've filed an extension, your deadline is October 15, 2021.

What states have no income tax?

Currently, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not have income taxes.

Unsure what you'll get back this year?

Tax season can be something you look forward to if you receive a refund. A lot of taxpayers use their refunds to pay down debts, catch up on bills, go on vacations, cover necessities for the family, or splurge on luxuries. However, knowing just how excited you should be can be hard to predict if you don't know what to expect. Wondering what your tax refund is going to be this year? The Taxfyle calculator can help you estimate your refund. Check out these tips.

How to Use the Taxfyle Income Tax Return Calculator
Using the Taxfyle calculator is simple, and you can choose between the simple calculator or the advanced tool. If you have income from an employer and don't itemize, the simple calculator is perfect, but if you plan to itemize, have self-employment income, or want to claim dependents, you should use the advanced calculator. Here are the steps:Choose your filing status. Single people usually file single, unless they have children in which case you may qualify for head of household. Married couples can choose between married filing jointly (the most advantageous choice for most couples) or married filing separately.

After losing a spouse, you can file as a qualifying widow(er) for two tax years, as long as you have dependent children and haven't remarried.Enter your income.Note any income tax withheld from your income by your employer.Review your refund estimate.If you want a more accurate estimate of your tax refund, use the Taxfyle advanced tax refund calculator. This calculator uses the same steps, but you also get to note your dependents.

Additionally, while the simple calculator only works with employment income, the advanced tool can handle self employment and unemployment income. If you are thinking about itemizing, the advanced calculator is the way to go so that you can note itemizable deductions such as mortgage interest, charitable deductions, etc.

What You Need When You Use Taxfyle's Advanced Refund Calculator
To make your refund estimate as straightforward as possible, you may want to gather a few details before you start. For the simple calculator, you just need your w-2s (and your spouse's W-2s if you are married).

If you want to use the advanced refund calculator, you need the following in addition to the W-2s: Your self-employment income, which consists of your business revenue and any earnings reported on a 1099-MISC minus expensesThe total of your quarterly tax paymentsAny unemployment income you receivedAmount you paid for mortgage interestCharitable contribution amountsMedical bills paid during the tax yearHow much you spent on childcareStudent loan interest paidHow to

Estimate Your Refund on Your Own
Using a tax refund calculator is the easiest way to get an estimate on your tax refund, but you can also do an estimate by hand. Figure out your filing status and find the deduction linked to that status. For instance, if you are married filing jointly, your standard deduction for 2018 is $24,000.Subtract your applicable standard deduction amount from your income and use the IRS's income tax brackets to find your potential tax rate. If your taxable income is up to $19,050 for a couple, your tax rate is 10%.

To explain, imagine you and your spouse earned $40,000 last year. After subtracting your standard deduction, you have $16,000 left. When you multiply that by 10%, you get your tax bill of $1,600. Now, look at your W-2s and any estimated payments if applicable — any income tax you paid over that amount, you get back as a refund. That said, the IRS takes into account a number of other details as well so using the calculator to double check your work is always helpful.

Eight free end of year tax tips to maximize your tax return

You may think you have tax time licked – you do things the same way every year, and it all goes smoothly enough. But what if you’re leaving money on the table?  You may be able to pocket some savings at tax-time if you make strategic moves to maximize your return.

The U.S. tax code is so complicated that there are many places to look to see if you might be able to squeeze a few more dollars out of your taxes. A professional tax preparer can be your partner in digging into all the corners of the tax code to make sure you’re getting the most out of your filing.Here are eight tips to maximize your return.

1. Take all possible deductionsChances are you’re among the 90% of households in the U.S. that take the standard deduction on your income taxes instead of itemizing. But if you do usually itemize or aren’t sure which is best for you, consider whether you can increase your deductions by moving some of your payments to an earlier date.For example, if your estimated state income tax bill is due January 15, you can send it in before December 31 and deduct it from this year’s return. The same goes with property tax bills due in January and medical bills that you can pay before the end of the year.The standard deduction for 2020 is $12,400 for single taxpayers, or $24,800 for those married filing jointly. If your itemized deductions can be pushed up above these limits, you should consider itemizing. One caution, however, is that if you are subject to the alternative minimum tax (AMT), then speeding up your deduction-qualifying payments can cost you money.

2. Make charitable contributionsMaking charitable contributions before the stroke of midnight on December 31st is another way to increase your deductions on your tax bill, which, as stated above, is mostly only useful if you are going to itemize. However, for 2020, the IRS has ruled that cash donations of up to $300 made before the last day of the year can be deducted by those who take the standard deduction.If you donate money in a given tax year, you’ll deduct the amount you have given from your income. If you donate goods such as furniture, clothing, or kitchen items, you deduct the goods’ “fair market value.” Taxpayers usually can only deduct charitable contributions up to 60% of their adjusted gross income, but that limit has been removed for the 2020 tax year; now you can deduct contributions totaling up to 100% of your income.  Don’t forget record-keeping: If you deduct a contribution of $250 or more, you need the organization to provide a receipt to keep in your records. Bigger-ticket items that have a value of more than $500,000 will need an appraisal.  In addition to reducing your taxes, charitable contributions can, of course, help you do good in the world. That’s something you can’t quantify in any bill.

3. Defer some of your incomeWhy pay today what you could put off until tomorrow? Some taxpayers may be in a position to postpone receipt of some income into the next tax year, which is a good way to lower your tax burden this year.Self-employed people are more likely to be able to do take advantage of this particular trick. They can delay sending invoices that are due at the end of the year until the beginning of the new year. Or they can push off plans to take capital gains into the new tax year.Employees may be able to ask for their year-end bonus to be delivered in January. Other than that, it can be difficult to take advantage of this option due to the regular schedule for wage and salary payment.Keep in mind that this tactic is only worth considering if you are likely to be in the same or a lower tax bracket next year. Paying as much tax as possible in the year in which you’re in the lower bracket is the best strategy.

4. Offset taxable gainsSince capital losses offset capital gains in your taxes dollar-for-dollar, selling investments at a loss can wipe out your tax bill on your gains for a year. This method of strategically selling  assets like stocks and mutual fund shares that have fallen below your purchase price — resulting in a loss — is known as “loss harvesting.”It may seem a little strange to purposefully sell your investments at a loss, but there’s a method to this madness. Harvesting your losses allows you to reduce your tax bill on your gains, providing a financial advantage at tax time.You can even sell so many investments that your losses get bigger than your gains. In that case, you can use up to $3,000 of those extra losses to reduce your taxable income by the same amount. If you have losses that amount to more than $3,000, you can carry amount of excess loss above $3,000 over to the next tax year.

5. Spend your flexible spending fundsMany employers offer their workers the ability to pay into flexible spending accounts (FSA), which allows the employees to spend on life essentials like child care or medical bills with pre-tax dollars. The money you’ve allocated is put directly by your employer into an FSA account, which you can use to pay providers directly.The main disadvantage with these types of accounts is that you must decide how much you’ll set aside in the account each month at the beginning of the year, and if you don’t use all the money you’ve allocated by the end of the year, you lose it. Well, that’s usually the case anyway, but due to Covid, a new rule is allowing employers to let employees roll over unused amounts into 2021 and even 2022.In most years, having money in your account at the end of December should prompt a run to the drug store for supplies or some last-minute doctor or dentist appointments. This year you can leave the money be, though make sure you’re not building up too much to reasonably spend over the next year or two.

6. Top up your retirement accountsRetirement contributions are a major source of deductions on your tax returns. It’s a good idea to contribute as much into your tax-deferred retirement accounts as you can in any given tax year. The most common type of retirement account is the 401(k), which is an employer-sponsored retirement account into which they put some of your money pre-tax every month.The maximum allowed contribution to an IRA is $19,500 for 2020, or $26,000 if you are age 50 or over. If you aren’t able to contribute that much, try to at least max out any employer match option. The IRS permits taxpayers to deduct contributions in a take year that are made on or before the April 15 filing deadline for that year.Self-employed people don’t have access to an employer’s 401(k) plan, but they might instead consider contributing to other tax-deferred retirement savings options like a SEP IRA or a solo-401(k).

7. Make an extra mortgage paymentAbout 13.8 million taxpayers were eligible for a mortgage-interest deduction in 2018, even though the tax bill passed in 2017 reduced the number of homeowners who could take advantage of this option.If you are a homeowner and are still eligible for the deduction, you can get a deduction to offset your taxes by making an extra mortgage payment by Dec. 31. This option has some limitations: Homeowners who bought their home after December 15, 2017, can only write off interest on up to $750,000 in loans.

8. Change your filing statusThe IRS lets taxpayers choose one of five filing statuses: single, married filing jointly, married filing separately, head of household, and qualified widow(er) with dependent child. Whatever your marital status is on Dec. 31 qualifies as your status for the entire year.

Which status you choose can affect your tax return. While most married couples file jointly, it may not be the most advantageous option. Under certain conditions, such as if your spouse has a lot of medical expenses, it may make sense to separate your tax filings.Unmarried taxpayers who have dependents might be able to save some money by claiming  head of household status.

You can claim this if you care for elderly parents, providing more than half of their support, even if you don’t live with them.It’s best to consult a tax professional to figure out which filing status is best for you, as well as how you can maximize your deductions. CPAs and EAs are trained to run scenarios to help you figure out the best way to approach your unique filing situation.

Taxfyle can help you get connected with an experienced and licensed CPA professional to file your taxes. We’re a one-stop online tax service with a deep network of U.S.-based CPAs and EAs who are ready to assist.

How does adjusted gross income (AGI) work?

The term “adjusted gross income” can elicit schoolyard snickers: It’s gross! But in the context of tax, this term is far less amusing. Gross here means “without deduction of tax or other. contributions; total.” So your gross income is the amount of money you bring in before Uncle Sam takes any of it. And your adjusted gross income (AGI) is that amount… after some adjustments.

What Is Adjusted Gross Income?

Tax preparation begins with your gross income, which is the amount of money you have coming to you before you deduct anything. Your adjusted gross income is your gross income minus various deductions — as in, amounts you don’t have to pay taxes on.

As the amount left after your take all allowable deductions to your gross income, AGI is the amount of your total income that is taxable. This number forms the basis of your tax calculations for your federal return and most likely also your state return, including the credits and other deductions you can apply.  

Earned vs. Unearned Income
It’s easy to confuse your gross income with your wages or salary. After all, most people’s wage earnings make up the bulk of their gross income. But gross income might include other income in addition to the figure you see on your paycheck. It’s made up not only of money you work for, called “earned income,” but also other sources of income, called “unearned income.”

Gross income provides a full picture of your income for a given tax year, including your salary, wages, tips, self-employment income, dividends, capital gains, interest, rental income, some retirement distributions, child support payments, most alimony payments received from 2019 onward, veterans' benefits, welfare benefits, workers' compensation, disability insurance income, Supplemental Security Income, royalties, and gambling winnings.

The bigger number you see on your paycheck — the one you wish you could actually stick in your bank account but is slashed by withholdings and other deductions — is an element of earned income. That smaller, slashed number on the paycheck — the amount you actually pocket after deductions — is an earned-income portion of your adjusted gross income.  Along with wages and salaries, self-employment earnings and tips are earned income. Unearned income, on the other hand, involves things you don’t work for directly, such as capital gains, rental income, and royalties.

Deductions That Affect Your Adjusted Gross Income
The deductions that you take out of your income in order to figure out your AGI are called“above-the-line” deductions. The name refers to the fact that all these deductions are ones you list on your tax form above the line for your AGI. They all go into calculating your AGI.

After you calculate your AGI, you’ll be able take further deductions — known, appropriately, as “below-the-line,” since the lines where you enter them are underneath the AGI line. The deductions you take above the line affect the amount and type of those you can claim below the line.  

A big difference between above-the-line and below-the-line deductions is that above-the-line deductions apply even if you don’t itemize your deductions on your tax return. It’s below the line where you decide whether to itemize all the deductions or claim the standard deduction instead.

Common Above-the-Line Deductions
Accurately calculating AGI requires a good understanding of above-the-line deductions. Missing any of the deductions that can apply to your situation will mean paying more taxes than you owe.

Here are the most common deductions taxpayers take to reduce their AGI.

Retirement plan contributions:
Traditional 401(k) contributions are one of the most common above-the-line deductions that taxpayers take, which will be reflected in an employee’s W-2 if they’re contributing through an employer plan.

Self-employment tax: Taxpayers who are self-employed have to pay the employer and employee portions of Social Security and Medicare taxes, so these workers can deduct the employer-equivalent portion of self-employment tax.

Self-Employment health insurance tax. Self-employed workers can deduct any fees or premiums they paid for health insurance, which can add up to a lot over the course of a year.

Healthcare Savings Account (HAS) deductions: Deposits paid directly to an HSA can be deducted, though payments routed through an employer are already deducted on an employee’s W-2.Alimony: The payer of alimony can deduct this amount only if those payments are made under a divorce or separation agreement executed before Dec. 31, 2018. Alimony is no longer a valid deduction since Jan. 1, 2019.

Moving expenses for military: Beginning in tax year 2018, the deduction for moving expenses can only be claimed in certain circumstances by military members.

Losses from property sales: A loss from the sale of rental or investment real estate can be deducted, but loss on the sale of property reserved for personal use cannot.

Withdrawal penalties from some accounts: Prematurely taking money out of an account like a certificate of deposit (CD) will garner a fee, which taxpayers are permitted to deduct from their taxes.

Academic fees and student loan interest: With a number of limitations, taxpayers can deduct school tuition, academic fees, and some types of student loan interest from their taxes.

Jury duty pay turned over to your employer: A taxpayer who served on a jury and gave the jury duty pay to their employer to compensate for salary paid during that time can deduct that amount from taxes.

Certain business expenses: Some business expenses in certain industries qualify as deductions, usually for performing artists, reservists, teachers, and some government officials.

Using Your Adjusted Gross Income To Do Your Taxes

Now time to break out the calculator! Add up all your income from all sources to find your gross income. Next, calculate your applicable above-the-line deductions and payments, and then subtract the total from your gross income. Voilà: Your AGI.
Most taxpayers use IRS Form 1040 to report these calculations. Like all IRS forms, this one comes with detailed instructions, though they can sometimes be more confusing than enlightening.
Once you’ve got your AGI nailed down, you can figure out whether it makes most sense to report itemized deductions or use the standard federal tax deduction. The total after you have taken away these below-the-line deductions is your final taxable income.

Standard or Itemized Deductions?
Taxpayers have the choice to deduct a single, set amount from their AGI or to deduct the total of a bunch of individual qualifying deductions, such as real estate taxes and charitable contributions, to arrive at their final taxable income.

In many taxpayers’ cases, the standard deduction will result in a bigger deduction than itemizing will. This became especially true after the adoption of the Tax Cuts and Jobs Act in 2017, which almost doubled the standard deduction amounts.

For the 2021 tax year, the standard deductions will be $25,100 for married couples filing joint returns; $12,550 for individual returns and married filing separately; and $18,800 for heads of households. The amount of the standard deduction can also vary with other factors such as blindness or age.

Only a very significant list of itemized deductions, including such items as major medical bills, large charitable contributions, and/or hefty mortgage interest, would be likely to add up to more than these standardized deduction amounts.  

Adjusted Gross Income vs. Modified AGI (MAGI)
If you thought AGI was complicated, you’re in for a treat. It’s also useful to know about modified adjusted gross income (MAGI), which is a further transformation of your AGI.
MAGI is a household’s AGI with any tax-exempt interest income and certain deductions added back in. MAGI takes account of things like foreign earned income, costs of higher education, and student loan interest to see if you qualify for various tax benefits, such as the ability to contribute to a Roth IRA and eligibility for the premium tax credit.

Can I Bury My Head Like an Ostrich?
Taxes can be complicated, to say the least. Words like adjustments, modification, deductions, and itemization may well make your head spin. Don’t even get us started on the acronyms.
The bad news is that you don’t have the option of sticking your head in the sand until it’s all over. As a taxpayer, you have no choice but to concern yourself with things like AGI and MAGI and Form 1040.

But there’s good news too: You don’t have to do this alone. You can get professional help with Taxfyle. Our Pros will calculate your AGI for you and get the best possible return from your taxes.

The term “adjusted gross income” can elicit schoolyard snickers: It’s gross! But in the context of tax, this term is far less amusing. Gross here means “without deduction of tax or other. contributions; total.” So your gross income is the amount of money you bring in before Uncle Sam takes any of it. And your adjusted gross income (AGI) is that amount… after some adjustments.

What Is Adjusted Gross Income?

Tax preparation begins with your gross income, which is the amount of money you have coming to you before you deduct anything. Your adjusted gross income is your gross income minus various deductions — as in, amounts you don’t have to pay taxes on.

As the amount left after your take all allowable deductions to your gross income, AGI is the amount of your total income that is taxable. This number forms the basis of your tax calculations for your federal return and most likely also your state return, including the credits and other deductions you can apply.  

Earned vs. Unearned Income
It’s easy to confuse your gross income with your wages or salary. After all, most people’s wage earnings make up the bulk of their gross income. But gross income might include other income in addition to the figure you see on your paycheck. It’s made up not only of money you work for, called “earned income,” but also other sources of income, called “unearned income.”

Gross income provides a full picture of your income for a given tax year, including your salary, wages, tips, self-employment income, dividends, capital gains, interest, rental income, some retirement distributions, child support payments, most alimony payments received from 2019 onward, veterans' benefits, welfare benefits, workers' compensation, disability insurance income, Supplemental Security Income, royalties, and gambling winnings.

The bigger number you see on your paycheck — the one you wish you could actually stick in your bank account but is slashed by withholdings and other deductions — is an element of earned income. That smaller, slashed number on the paycheck — the amount you actually pocket after deductions — is an earned-income portion of your adjusted gross income.  Along with wages and salaries, self-employment earnings and tips are earned income. Unearned income, on the other hand, involves things you don’t work for directly, such as capital gains, rental income, and royalties.

Deductions That Affect Your Adjusted Gross Income
The deductions that you take out of your income in order to figure out your AGI are called“above-the-line” deductions. The name refers to the fact that all these deductions are ones you list on your tax form above the line for your AGI. They all go into calculating your AGI.

After you calculate your AGI, you’ll be able take further deductions — known, appropriately, as “below-the-line,” since the lines where you enter them are underneath the AGI line. The deductions you take above the line affect the amount and type of those you can claim below the line.  

A big difference between above-the-line and below-the-line deductions is that above-the-line deductions apply even if you don’t itemize your deductions on your tax return. It’s below the line where you decide whether to itemize all the deductions or claim the standard deduction instead.

Common Above-the-Line Deductions
Accurately calculating AGI requires a good understanding of above-the-line deductions. Missing any of the deductions that can apply to your situation will mean paying more taxes than you owe.

Here are the most common deductions taxpayers take to reduce their AGI.

Retirement plan contributions:
Traditional 401(k) contributions are one of the most common above-the-line deductions that taxpayers take, which will be reflected in an employee’s W-2 if they’re contributing through an employer plan.

Self-employment tax: Taxpayers who are self-employed have to pay the employer and employee portions of Social Security and Medicare taxes, so these workers can deduct the employer-equivalent portion of self-employment tax.

Self-Employment health insurance tax. Self-employed workers can deduct any fees or premiums they paid for health insurance, which can add up to a lot over the course of a year.

Healthcare Savings Account (HAS) deductions: Deposits paid directly to an HSA can be deducted, though payments routed through an employer are already deducted on an employee’s W-2.Alimony: The payer of alimony can deduct this amount only if those payments are made under a divorce or separation agreement executed before Dec. 31, 2018. Alimony is no longer a valid deduction since Jan. 1, 2019.

Moving expenses for military: Beginning in tax year 2018, the deduction for moving expenses can only be claimed in certain circumstances by military members.

Losses from property sales: A loss from the sale of rental or investment real estate can be deducted, but loss on the sale of property reserved for personal use cannot.

Withdrawal penalties from some accounts: Prematurely taking money out of an account like a certificate of deposit (CD) will garner a fee, which taxpayers are permitted to deduct from their taxes.

Academic fees and student loan interest: With a number of limitations, taxpayers can deduct school tuition, academic fees, and some types of student loan interest from their taxes.

Jury duty pay turned over to your employer: A taxpayer who served on a jury and gave the jury duty pay to their employer to compensate for salary paid during that time can deduct that amount from taxes.

Certain business expenses: Some business expenses in certain industries qualify as deductions, usually for performing artists, reservists, teachers, and some government officials.

Using Your Adjusted Gross Income To Do Your Taxes

Now time to break out the calculator! Add up all your income from all sources to find your gross income. Next, calculate your applicable above-the-line deductions and payments, and then subtract the total from your gross income. Voilà: Your AGI.
Most taxpayers use IRS Form 1040 to report these calculations. Like all IRS forms, this one comes with detailed instructions, though they can sometimes be more confusing than enlightening.
Once you’ve got your AGI nailed down, you can figure out whether it makes most sense to report itemized deductions or use the standard federal tax deduction. The total after you have taken away these below-the-line deductions is your final taxable income.

Standard or Itemized Deductions?
Taxpayers have the choice to deduct a single, set amount from their AGI or to deduct the total of a bunch of individual qualifying deductions, such as real estate taxes and charitable contributions, to arrive at their final taxable income.

In many taxpayers’ cases, the standard deduction will result in a bigger deduction than itemizing will. This became especially true after the adoption of the Tax Cuts and Jobs Act in 2017, which almost doubled the standard deduction amounts.

For the 2021 tax year, the standard deductions will be $25,100 for married couples filing joint returns; $12,550 for individual returns and married filing separately; and $18,800 for heads of households. The amount of the standard deduction can also vary with other factors such as blindness or age.

Only a very significant list of itemized deductions, including such items as major medical bills, large charitable contributions, and/or hefty mortgage interest, would be likely to add up to more than these standardized deduction amounts.  

Adjusted Gross Income vs. Modified AGI (MAGI)
If you thought AGI was complicated, you’re in for a treat. It’s also useful to know about modified adjusted gross income (MAGI), which is a further transformation of your AGI.
MAGI is a household’s AGI with any tax-exempt interest income and certain deductions added back in. MAGI takes account of things like foreign earned income, costs of higher education, and student loan interest to see if you qualify for various tax benefits, such as the ability to contribute to a Roth IRA and eligibility for the premium tax credit.

Can I Bury My Head Like an Ostrich?
Taxes can be complicated, to say the least. Words like adjustments, modification, deductions, and itemization may well make your head spin. Don’t even get us started on the acronyms.
The bad news is that you don’t have the option of sticking your head in the sand until it’s all over. As a taxpayer, you have no choice but to concern yourself with things like AGI and MAGI and Form 1040.

But there’s good news too: You don’t have to do this alone. You can get professional help with Taxfyle. Our Pros will calculate your AGI for you and get the best possible return from your taxes.

File simpler.

File smarter.

File with Taxfyle.