Adjusted Gross Income (AGI)
Quick definition
Your total income minus specific adjustments. It is a key figure that many other tax calculations and state returns build on.
Adjusted Gross Income (AGI) is your total income minus certain adjustments. It is one of the most referenced numbers on a federal return because many credits, deductions, and state taxes key off it.
How mileage feeds into it
Your business mileage deduction reduces net profit on Schedule C. That lower net profit flows up into your AGI. Most states start their own return from your federal AGI, so a mileage deduction usually lowers both federal and state tax.
Why drivers should know it
AGI also affects the income thresholds for the QBI deduction and the calculation of self-employment tax adjustments. Lowering it through legitimate deductions has effects beyond the single line.
Related terms
Schedule C
The federal form self-employed workers use to report business income and expenses, including the mileage deduction.
Self-Employment Tax
The 15.3% tax on net self-employment income that funds Social Security and Medicare.
QBI Deduction (Section 199A)
A federal deduction (Section 199A) that lets eligible self-employed taxpayers deduct up to 20% of their qualified net business income.
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