AGI (Adjusted Gross Income) is an IRS term
that is related to a taxpayer's gross income after certain adjustments have
been made to a taxpayer's
gross income. The
adjustments that are made to gross income are called
above the
line deductions. Specifically,
Gross Income - Above the Line Deductions = Adjusted Gross Income
Adjusted gross income is important for
airline pilot and flight attendant tax
calculations because it is one of the variables used to determine the value of
the employee business expense deductions for a flight crewmember. The reason
employee business expenses are affected by AGI is primarily because of the
2%
limit. Because only the employee business expenses that exceed a
pilot or
flight attendant's AGI times 2% are deductible, the higher the crewmember's
AGI, the lower the benefit of deducting employee business expenses, though other variables such as the taxpayer's tax bracket also affect the tax benefit.
Employee business expenses are simply one component of a taxpayer's
itemized
deductions (below the line deductions). In this sense, think of AGI as the
line. Any adjustments or deductions that occur to gross income used to
calculate AGI are above the line deductions. Any adjustments or deductions
that occur to AGI used to calculate
taxable income are below the line
deductions.
