Why is TaxAct calculating my AGI without subtracting deductions for IRS Free File?
Title: Why is TaxAct calculating my AGI without subtracting deductions for IRS Free File? 1 I think I'm missing something about how AGI is calculated. TaxAct is telling me I'm not eligible for the IRS Free File program because my AGI is over the $79,000 limit. But here's the confusing part - my gross income is above that threshold, but once I subtract all the deductions I entered into TaxAct, I should be well under $79,000. I've double-checked all my numbers and I'm pretty sure my income minus deductions puts me around $76,500. So either I don't understand what AGI actually is, or something weird is happening with how TaxAct is calculating it. Can someone explain if deductions are supposed to lower your AGI for Free File eligibility? I'm really trying to avoid paying for tax prep this year if I don't have to.
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Connor Byrne
12 AGI (Adjusted Gross Income) is a bit confusing because not all deductions reduce your AGI! There are "above-the-line" deductions that reduce your gross income to calculate your AGI, and then there are "below-the-line" deductions that happen after your AGI is already calculated. Above-the-line deductions that reduce your AGI include things like student loan interest, HSA contributions, self-employment tax, retirement contributions to traditional IRAs, and certain business expenses. These are sometimes called "adjustments to income." Below-the-line deductions like the standard deduction or itemized deductions (mortgage interest, charitable donations, etc.) don't affect your AGI at all. They reduce your taxable income AFTER your AGI is calculated. What kind of deductions are you entering into TaxAct? If they're primarily below-the-line deductions, that would explain why your AGI isn't being reduced.
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Connor Byrne
•3 Ok that's starting to make sense. So my 401k contributions will reduce AGI but my standard deduction won't? What about my FSA contributions for healthcare? And what about the health insurance premiums that come out of my paycheck pre-tax? Sorry, just trying to figure out what should actually be lowering my AGI vs what doesn't.
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Connor Byrne
•12 You've got it exactly right about the 401k! Your traditional 401k contributions do reduce your AGI (they're pre-tax/above-the-line), but your standard deduction doesn't affect AGI at all. For your FSA contributions, yes those are pre-tax and reduce your AGI. Same with health insurance premiums paid through a cafeteria plan at work - those are pre-tax and should be reducing your AGI already. However, these deductions often happen automatically on your W-2, meaning your W-2 box 1 income already reflects these reductions. If that's the case for you, you wouldn't deduct them again when entering your tax information.
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Connor Byrne
9 I went through this exact same confusion last year! I found the solution with taxr.ai that really helped clear things up. When I was confused about why my AGI wasn't matching what I expected, I uploaded my tax forms to https://taxr.ai and their system actually explained exactly how my AGI was being calculated and which of my deductions were above-the-line vs below-the-line. What I discovered is that most of my deductions were happening after AGI was calculated, which is why I kept hitting the same issue with qualifying for free filing. The tool highlighted specific adjustments I could make to lower my AGI. Worth checking out if you're still confused about where the discrepancy is coming from.
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Connor Byrne
•7 Does it actually tell you what specific things you could change to qualify for free filing? I'm in almost the same situation where I'm just slightly over the limit.
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Connor Byrne
•14 I'm a bit skeptical about tools like this. How does it know what's better for your personal situation? Does it have access to all the tax laws and updates for 2025 filing?
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Connor Byrne
•9 It identifies specific above-the-line deductions you might be eligible for but haven't claimed yet, like IRA contributions or student loan interest. In my case, it pointed out I could make a last-minute traditional IRA contribution to reduce my AGI by up to $6,500 (or $7,500 if you're over 50). That single change pushed me below the threshold. Yes, it's updated with all the current tax laws and thresholds for 2025. They update their system regularly with the latest IRS changes. It doesn't make decisions for you - it just shows you the options that legally exist to lower your AGI specifically.
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Connor Byrne
7 Just wanted to update that I tried taxr.ai and holy crap it was actually super helpful! I was able to figure out that I could make a traditional IRA contribution to lower my AGI just enough to qualify for free filing. The system even calculated exactly how much I needed to contribute to get under the threshold. Ended up saving me way more than I spent on the contribution since I needed to save for retirement anyway. Already filed through the free program!
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Connor Byrne
11 If you're frustrated with TaxAct's lack of clear explanations, you might want to try getting a human at the IRS to explain your options. I was beating my head against the wall with tax software last year until someone recommended https://claimyr.com to get through to an actual IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was amazed that I actually got through in under 15 minutes when I'd been trying for days on my own. The agent walked me through exactly how AGI is calculated and confirmed which programs I was eligible for. They even told me about a free filing option I didn't know existed for my situation.
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Connor Byrne
•16 Wait how does this service work? I thought it was impossible to get through to the IRS. Do they just keep calling for you or something?
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Connor Byrne
•22 Yeah right. There's no way you got through to the IRS that quick. I tried calling for two weeks straight during filing season last year and never got a human. Sounds like a scam to me.
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Connor Byrne
•11 They use a system that navigates the IRS phone tree automatically and holds your place in line. When an agent becomes available, it calls you back and connects you immediately. It's basically like having someone wait on hold for you instead of doing it yourself. I was skeptical too before trying it. The IRS actually does answer calls, the problem is that most people can't afford to wait on hold for 2-3 hours. This service just does the waiting for you. I got clear answers about my AGI questions directly from an IRS rep who could see my file and previous years' information.
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Connor Byrne
22 I've gotta eat crow here. After being totally convinced this Claimyr thing was a scam, I was desperate enough to try it yesterday. Shockingly, I got a call back with an actual IRS agent in about 35 minutes. The agent confirmed exactly what others were saying here - my HSA contributions and traditional 401k were lowering my AGI, but my itemized deductions weren't. They also told me about a state-specific free file program I qualified for even though my AGI was too high for the federal program. So... I was wrong and it actually worked.
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Connor Byrne
5 Have you tried looking at your tax forms from last year? Your 1040 actually breaks down the calculation of AGI pretty clearly. Line 11 shows your AGI, and lines 1-10 show how it's calculated (with adjustments that reduce your AGI on lines 10a-10c). Might help you compare what's happening in TaxAct with your previous returns.
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Connor Byrne
•18 What if this is the first year OP's income is high enough to hit this issue? Looking at previous returns wouldn't show the problem.
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Connor Byrne
•5 That's a good point. In that case, a quick way to check is to look at your inputs in TaxAct. Find the section for "Adjustments to Income" (sometimes under "Deductions" or "Credits & Deductions"). This will list all the things that can reduce your AGI. Common ones with big impacts are traditional IRA contributions, student loan interest, HSA contributions, and self-employment expenses. If your income is just slightly above the threshold, making a traditional IRA contribution before the tax deadline could reduce your AGI enough to qualify for free filing.
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Connor Byrne
15 Here's a trick that might work: Try a different tax software! Each free file provider has different AGI limits. TaxAct's might be $79k but TaxSlayer has a limit of $81k this year I think, and some others go up to $85k or $90k depending on your filing status.
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Connor Byrne
•21 On the IRS website it says all the Free File software options use the same AGI limits - they're set by the IRS, not the companies. But some have other qualifications like age restrictions or state limitations.
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FireflyDreams
This is such a common misconception! I see this question a lot during tax season. The key thing to remember is that your AGI is calculated BEFORE most of the deductions people think about. Your W-2 Box 1 already reflects pre-tax deductions like health insurance premiums, FSA/HSA contributions, and 401k contributions - so those are already reducing your AGI. But things like the standard deduction ($14,600 for single filers in 2024) or itemized deductions happen AFTER your AGI is set. If you're close to the $79,000 threshold, look for "above-the-line" deductions you might have missed: traditional IRA contributions (up to $7,000 if under 50), student loan interest deduction, educator expenses if you're a teacher, or HSA contributions if you have a high-deductible health plan and haven't maxed it out yet. You can also double-check by looking at last year's Form 1040 - Line 11 shows your AGI and you can trace back through the form to see exactly what reduced it from your gross income.
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