Final answer:
State income tax refunds are not included in adjusted gross income on an individual's federal income tax return. AGI includes income from a sole proprietorship, stock dividends, wages, and tips, but not state tax refunds unless the tax benefit was received from itemizing in a previous year.
Step-by-step explanation:
The item that is not included in adjusted gross income (AGI) on an individual's federal income tax return is state income tax refunds. Adjusted gross income is a measure of income that is calculated by taking an individual’s gross income and subtracting specific deductions.
It includes a variety of sources such as income from a sole proprietorship, stock dividends, wages, and tips. However, state income tax refunds are generally not counted as income for federal income tax purposes unless you itemized deductions in a previous year and received a tax benefit from that. Therefore, when calculating AGI on the federal income tax return, these refunds are excluded.
Adjusted Gross Income (AGI) is the sum of all the income an individual receives in a year minus certain deductions. According to the information provided, of the options given, wages and tips are not included in AGI. AGI includes income from a sole proprietorship, stock dividends, and state income tax refunds. Wages and tips are reported separately on the tax return and are not considered part of AGI.