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Adjusted gross income (AGI) sets the ceiling or the floor for certain deductions. Explain and illustrate...

Adjusted gross income (AGI) sets the ceiling or the floor for certain deductions. Explain and illustrate what this statement means.

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Expert Solution

Adjusted gross income (AGI) sets the ceiling or the floor for certain deductions.

  • This statement means the AGI is the income which is required to calculate the individual tax liability and also it sets the base for various deductions.
  • Adjusted gross income is reported in IRS form 1040 and using this the total tax liability of an individual is calculated.
  • AGI is the starting point for calculation of tax liability of filer's tax and also is basis for various deductions and credits.
  • It can asli be said that AGI influences the taxpayers eligibility for various deductions and credits.
  • So the only point of conclusion is that it is very true that Adjusted gross income (AGI) sets the ceiling or the floor for certain deductions.
  • AGI is the gross of all the income earned by the individual in a year and certain deductions are to be deducted from gross income only to get/reach a figure on which the tax liability is to be calculated.

ekkarill92 answered 1 year ago
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