Calculating your adjusted gross income
If you're a salaried employee, your salary probably constitutes the majority (but not the total) of your gross income (unless you have a side business or other employment ventures to account for). If you receive an hourly wage, you'll have to calculate your gross income by multiplying the amount you're paid hourly by the number of hours you work each week. Then, multiply that figure by four (the number of weeks in a month) to calculate your monthly earnings. Take that product and multiply it by twelve (the number of months in a year) to calculate your gross income for the year.
Be sure to keep careful track of any tips and/or bonuses, as they too count as part of your gross income, as do alimony payments received, unemployment compensation, or taxable Social Security benefits. If you have other investments, be aware that business revenue, taxable interest, rental real estate royalties, and any other income not listed here are also potentially part of your gross annual income.
As of 2018, if you are under 65, filing single, and your annual gross income (NOT your gross adjusted income) is $12,000 or more, you'll be required to file a tax return. If you're over 65, you will be required to file if your annual gross income is $13,600 or more.1 Be aware that those amounts are subject to change with each new tax year. If you need help determining whether you should file, you can visit the IRS website and take a short survey.
Once you've determined if you need to file a tax return, it's time to calculate your adjusted gross income. This is an important figure to know when filing your taxes because it is your adjusted gross income and NOT your annual gross income that determines your full tax liability. Your adjusted gross income is determined by taking your annual gross income and subtracting certain items including:
- Educator expenses
- Certain business expenses of reservists, performing artists, and fee-basis
- government officials*
- Health savings account deduction*
- Moving expenses*
- Deductible part of self-employment tax
- Self-employed SEP, SIMPLE, and qualified plans
- Self-employed health insurance deduction
- Penalty on early withdrawal of savings
- Alimony paid
- IRA deduction
- Student loan interest deduction
- Tuition and fees*
- Domestic production activities deduction*
An experienced tax professional can help walk you through the finer points of these itemizations, as well as answer any tax related questions or concerns.
If you'd like to learn more about specific tax credits for families or taxes and your Social Security benefits, visit the Protective Learning Center.
*Attachment of appropriate forms required