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Adjusted Gross Income (AGI) and Your Student Loans

Learn how to locate your AGI and use it to improve student loan repayment options and access tax benefits.

Written By: Michael P. Lux, Esq.

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Adjusted Gross Income (AGI) plays an essential role in determining your student loan payments if you’re on an income-driven repayment plan. Understanding AGI and its impact can help you manage your student loans more effectively, potentially lowering your monthly payments.

How to Look Up Your AGI

Finding your AGI is straightforward and there are a few options to locate the exact number:

  1. 1040 Form: On the standard 1040 tax form, your AGI is listed on Line 11.
  2. 1040-SR Form: If you use the 1040-SR form, designed for seniors, your AGI is on Line 11.
  3. IRS Website: If you don’t have access to your physical tax documents, you can look up your AGI on the IRS website. Log into your account on IRS.gov, navigate to the “Tax Records” section, and you’ll find your AGI on your most recent tax return.

Understanding Adjusted Gross Income (AGI)

AGI is your gross income after specific adjustments, also known as “above-the-line” deductions. It includes your total income from wages, dividends, capital gains, business income, and other sources, minus allowable deductions like student loan interest, retirement plan contributions, and tuition fees.

Difference Between AGI and Annual Salary:

  • Annual Salary: This is your total income before any deductions.
  • AGI: This is your income after accounting for allowable adjustments. It’s typically lower than your annual salary due to these deductions.

To be clear, Adjusted Gross Income isn’t something that is used just for student loans. Instead, it is a critical figure during tax season. AGI is essential for determining eligibility for various tax credits and deductions, in addition to calculating your tax bill.

AGI for Married Couples

For married couples, understanding how AGI works is vital, especially when estimating student loan payments:

  • Joint Filers: Couples who file jointly will have a shared AGI, which includes the combined income and deductions of both spouses.
  • Separate Filers: Couples who file separately will have independent AGIs, meaning each spouse’s AGI is calculated based on their individual income and deductions.

When estimating student loan payments, using AGI is the best way to get an accurate picture of payments on various repayment plans. If your AGI includes your spouse’s income, it means you filed jointly and your spouse’s income will be factored into your student loan payment. If you file seperately, your spouse’s income is not included in your AGI and it does not impact your student loan payments.

For this reason, many married student loan borrowers elect to file their taxes separately.

Keeping AGI Down to Lower Student Loan Payments

Keeping your AGI as low as possible can result in lower monthly payments for those on income-driven repayment plans like SAVE. Here are some strategies:

  • Above-the-Line Deductions: These deductions lower your AGI and include contributions to certain retirement plans, student loan interest, tuition fees, and health savings account (HSA) contributions.
  • Below-the-Line Deductions: These deductions, such as standard or itemized deductions, do not affect your AGI.

Examples of Deductions That Lower AGI

  1. 401(k) Contributions: Money contributed to a 401(k) retirement plan reduces your taxable income and thus your AGI.
  2. Traditional IRA Contributions: Putting money in an IRA will also lower yoru AGI. (Note: Roth IRA contributions do not reduce AGI.)
  3. Health Savings Account (HSA): Contributions to an HSA are deductible, lowering your AGI.
  4. Student Loan Interest: Up to $2,500 of student loan interest can be deducted, reducing your AGI.

To dig deeper, check out this article for more detailed strategies on how to lower your AGI to reduce student loan payments.

By understanding and managing your AGI, you can better control your student loan payments and take advantage of income-driven repayment plans to reduce your financial burden and get more student debt forgiven.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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