Why is the Adjusted Gross Income figure larger than Total Income?

Comparing the Total Income (on the Total Income schedule) to the Adjusted Gross Income (on the Federal Taxes - Joint Filer schedule), the AGI is larger than the TI. Are there adjustments for federal taxes that are not shown?


dan royer's picture

This is not so simple to explain, but I can pull some comments from some versions of this question/answer from a few years ago. The questions were asked in 2012 or different years, so just transpose 2015. I may be giving you more info than you are really asking for. I hope this is enough to at least assure you that the numbers are right. But when trying to do conversions from nominal to real etc. the explanation gets convoluted. Furthermore, that joint filer worksheet was not originally designed to be part of the reports--it's a kind of behind-the-scenes calculation tool, but it seems useful until someone tries to do the calculations themselves. Then it raises questions like you have asked. Anyway, the bottom line is that there's some real to nominal conversion going on that makes it difficult to reconcile the numbers. But anyway, see if this helps:

The Total Income shown in the main report is the real income that you live on.

The AGI in the Federal Taxes report includes the real value of the total nominal return on regular assets since you are taxed on total nominal return.

For example, if in 2012 you had $10,000 in regular assets, a nominal rate of return of 6%, and inflation of 4%, then your total nominal return that is included in AGI will be $600. But since you live on real return, only $192 will be included in Total Income.

All numbers in all reports are in real 2012 dollars.

The terminology is a bit confusing when discussing total return, since it is also called nominal return.

The Federal Tax report shows the real value of the total/nominal asset return in the Nom Assets Inc column. That's what's included in the AGI.

That's different than the nominal value of the total/nominal asset return.

The main report shows the real value of the real return in the Regular Asset Income column of the Total Income tab.

[And then there is this]:

There are things in AGI that aren't reported in the tax reports (the original design center for the tax reports was as a debugging tool, not a report detailing the 1040, et al. and it was decided to let our customers in on the information).

AGI is:

earning +
pensions -
contributions to tax favored retirement accounts +
life insurance payouts +
special receipts +
annuity receipts +
real estate tax flow +
nominal asset income +
capital gains nominal income +
taxable social security benefit +
housing and real estate capital gain -
self employed payroll taxes

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