AGI, or Adjusted Gross Income, is a crucial financial term that summarizes an individual’s total income for tax purposes. It represents the total money a person earns from various sources minus specific deductions and adjustments.
Understanding AGI is important for several reasons:
It determines eligibility for various tax benefits and credits, such as the Child Tax Credit, Earned Income Tax Credit, and the American Opportunity Credit for education expenses.
It is used as a basis for calculating taxable income, which ultimately determines the amount of income subject to federal and state income taxes.
It serves as a measure of an individual’s financial standing and is often required for various financial applications, such as assessing creditworthiness, determining loan eligibility, or establishing rental agreements.
