Definition of Adjusted Gross Income



Adjusted gross income is the amount on which the individual tax liability is calculated. Gross income includes salary, rental income, dividends or interest, capital gains, social security income and any other compensatory incomes like a pension.

 


Since the gross income includes lots of items that are not subject to tax and so these items should be adjusted from gross income to reach the final taxable figure. These items may include study expenses, deduction on health saving account, taxes on self-employed that are deductible; retirement accounts contributions, interest on education loan, and others.

 

View More Financial Algebra Definitions