The way you calculate adjusted gross income, or AGI, when you're married filing jointly is no different than the way single and head of household filers calculate it. One difference when calculating AGI on a joint return, however, is that you have to combine your income and expenses with your spouse's. If your joint AGI is high, it might prevent you from taking certain tax deductions and credits.
Combine Your Incomes
If you file on Form 1040, the first page of your return takes you through the full line-by-line calculation that's used to arrive at your joint AGI, which is reported on the last line of page one. Initially, you'll combine your earnings with your spouse's income to come up with your joint “total income.” Total income essentially includes every dollar you both earn during the year -- such as wages, interest, dividends, capital gains, unemployment benefits and rental income -- that isn't specifically exempt from federal income tax.
Adjustments to Your Joint Total Income
Once you're comfortable that your joint total income is accurate, a number of adjustments to income -- specific types of tax deductions you can take to calculate AGI -- are available. For each adjustment reported on the return, only one of you must be eligible to claim it. In other words, it isn't necessary that both of you satisfy each deduction's eligibility requirements. Each adjustment directly offsets, or reduces, your joint total income to arrive at your AGI. These adjustments cover a limited number of deductible expenses, which are taken before further reductions to your income are permitted for personal and dependent exemptions, itemized and standard deductions and all tax credits. But if you and your spouse aren't eligible for a single adjustment, your AGI is the same as total income.
Types of Adjustments
The types of expenses you can deduct from total income to calculate your joint AGI can vary from one tax year to the next, but the majority of them are consistently available each year. Some of the available adjustments cover the out-of-pocket expenses of certain education costs, work-related moving costs, one-half of the Social Security and Medicare tax that you or your spouse might pay because of self-employment, alimony payments to a former spouse, student loan interest, tax-deferred retirement account contributions, and other costs. The more expenses you can write off in the “Adjusted Gross Income” section of your return, the lower your joint AGI will be.
How AGI Impacts Tax Returns
Adjusted gross income serves many purposes, which is why it's frequently referenced in the instructions to your tax form. If you itemize deductions on Schedule A, for example, your medical expenses are only deductible to the extent the total exceeds 10 percent, or in some cases 7.5 percent, of your AGI. Similar restrictions exist for job-related and other miscellaneous expenses in that your total deduction is reduced by 2 percent of your joint AGI. In addition, your joint AGI is used to evaluate whether you can write off the full amount reported on Schedule A or will have to reduce the overall deduction. As of the 2013 tax year, if you claim personal and dependent exemptions, reporting a joint AGI that's more than $300,000 will cause you to lose a portion of the exemptions claimed on your joint return.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.