All your income from whatever source (wages, rents, dividends, profits from a business, and so forth) less certain deductions (trade or business expenses, depreciation on rental property, allowable losses from sales of property, alimony payments, and so forth). It is sometimes called AGI. Adjusted gross income is important for calculating the amount of medical expenses and casualty losses that you can deduct. The $25,000 special allowance to deduct rental expenses when you actively participate is based on modified adjusted gross income, which is adjusted gross income increased by any passive activity losses, certain social security payments, and individual retirement account deductions (IRAs). This is important in assessing the value to an investment in the now permanent low income housing credit.
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