Calculating adjusted gross income (AGI) from a W-2 form helps individuals determine their taxable income, serving as the foundation of tax returns. AGI represents the total income minus certain deductions, such as contributions to retirement plans and health savings accounts.
Understanding how to calculate AGI is crucial for accurate tax reporting, reducing tax liability, and maximizing deductions.Historically, the concept of AGI has evolved over the years to provide more flexibility and adaptability to taxpayers’ financial situations.