Determining your annual income is part of computing which financial metric?

Determining your annual income is fundamentally related to calculating Adjusted Gross Income (AGI). AGI represents your total gross income, which is the sum of all your income sources, including wages, dividends, capital gains, business income, and other earnings, minus specific deductions. These deductions are typically referred to as adjustments to income, which can include contributions to a traditional IRA, student loan interest payments, and educator expenses, among others.

Understanding AGI is critical because it serves as a starting point for determining taxable income and can impact eligibility for various tax credits and deductions. The calculation of AGI summarises what you earn in a year while considering allowable adjustments, shaping your overall tax liability and financial planning.