Tax Return Adjustments Impact

Adjustments to income directly impact an individual tax return in several key ways:

1. They reduce total income to calculate Adjusted Gross Income (AGI).
2. AGI affects various tax benefits and limitations, including:
   • Medical expense deduction thresholds (7.5% of AGI)
   • IRA contribution limits and deductibility
   • Various tax credit eligibility
3. Modified AGI (MAGI) calculations build upon AGI by adding back certain adjustments for specific tax purposes, such as:
   • Student loan interest deduction
   • Foreign earned income exclusion
   • Foreign housing exclusion/deduction
   • U.S. Savings Bond interest for education
   • Employer-provided adoption benefits

The key point is that adjustments reduce your total income to arrive at AGI, which then becomes the foundation for calculating taxable income and determining eligibility for various tax benefits.