Adjusted gross income is the income earned before taxes are applied to it with specific subtractions deducted from it. This is different from net income which already has the taxes removed from it. Adjusted gross income is what is required when filling out most IRS tax returns as well as state tax forms. This also applies to companies, not just individuals. If there is more than one source of income, the total gross income from each source must be compiled and added before the deductions are taken out in order to come up with the adjusted gross income. The adjusted gross income can be found easily in previously filed IRS tax forms. For example, on an IRS Form 1040EZ, it is on line 4, line 21 on IRS Form 1040A, and found on line 37 for those who filed IRS Form 1040. E-Filers need the previous year’s information to file.

Married couples filing jointly must find verify if combining their income moves them into a higher tax bracket which can result in higher taxes paid, than if they filed married filing jointly giving them each a lower adjusted gross income. If one spouse is earning $50,000/year and the other is earning twice that, they may not be able to take certain deductions with a large adjusted gross income. For example, in itemizing deductions, one can itemize only when the deductions are over 4% of their adjusted gross income. In this case, it’s better to itemize having 4% of $50,000 than with 4% of $150,000.