What Are Adjustments to Income?

Adjustments are subtractions from total income. Total income minus adjustments equals the adjusted gross income (AGI). AGI is used to figure certain limitations and income tax for some states.

Taxpayers cannot take any adjustments on Form 1040EZ.

Form 1040A allows taxpayers to take adjustments for:

• Penalty on early withdrawal of savings
• Traditional IRA contributions
• Student loan interest
• Jury duty pay given to employer

All other adjustments must be taken on Form 1040.

Adjustments related to IRAs are covered in the Individual Retirement Arrangements lesson in the Intermediate course.

	Adjustments to income covered in this training include one-half of self-employment tax; penalty on early withdrawal of savings, alimony paid, IRA deduction, student loan interest deduction, and jury duty pay taxpayers gave to their employer. There are other adjustments to income on Form 1040 that are beyond the scope of the VITA/TCE program. If you believe a taxpayer could benefit from one of these other adjustments, refer them to a professional tax preparer.