Your total income minus specific deductions like retirement contributions and self-employment tax.
Adjusted Gross Income (AGI) is your gross income minus specific adjustments allowed by the IRS. For self-employed individuals, this includes the deductible portion of self-employment tax, health insurance premiums, and retirement contributions. Your AGI determines eligibility for many tax credits and deductions, making it a crucial number on your tax return.
If you earn $120,000 freelancing and contribute $15,000 to a SEP IRA, plus deduct $8,500 for the self-employed portion of SE tax, your AGI would be $96,500.
Start with your gross income from all sources, then subtract adjustments like SEP IRA contributions, half of self-employment tax, and health insurance premiums if self-employed.
AGI determines your eligibility for many deductions and credits. A lower AGI can mean more tax savings through credits like the Earned Income Credit or education credits.
AlphaTax helps self-employed professionals maximize tax savings with AI-powered expense tracking.
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