- Your adjusted gross income, or AGI, is your total income minus specific deductions.
- AGI determines your eligibility for tax credits, deductions, and retirement account contributions.
- Subtract the standard deduction or itemized deductions from AGI to get taxable income.
If you pay U.S. taxes, chances are you've come across the term "adjusted gross income."
Your adjusted gross income, or AGI, is your taxable income prior to deducting your standard or itemized deductions. The number is used by the IRS to determine whether you qualify for certain tax deductions and tax credits. It's also used in the calculation to determine how much federal tax you owe.
How to calculate AGI
1. Start with gross income
This is the total amount of taxable money you receive in any given year, including wages and tips, self-employment earnings, realized investment gains, sales of capital assets, retirement plan distributions, Social Security benefits, and alimony payments from a pre-2018 divorce agreement.
2. Subtract above-the-line deductions
Once you know your gross income, you can find your AGI by subtracting above-the-line deductions, otherwise known as "adjustments to income."
The most common federal above-the-line deductions include:
- Student-loan interest up to $2,500
- Contributions to a qualified retirement plan or traditional IRA
- Health savings account contributions
- One-half of self-employment taxes
- Health insurance premiums for self-employed people
- The penalty on early savings withdrawals
- Moving expenses for active military members
- Educator expenses up to $250
Impact of AGI on taxes
Once you know your AGI, you can figure out how much of the money you earned during the year is subject to income taxes.
To do so, start with your AGI and then subtract either the standard deduction — $14,600 for single filers and $29,200 for married joint filers in 2024 — or itemized deductions (like mortgage interest or state and local taxes), whichever is higher. This brings you to your total taxable income. The IRS applies this figure to the tax brackets to determine your tax liability.
Why AGI matters
AGI, or a variation of it, is used as a benchmark for a number of financial and tax matters.
If you see the term "modified adjusted gross income," or MAGI, it is your AGI with certain deductions added back in and is used for determining eligibility for tax credits and deductions and contribution limits for tax-advantaged retirement accounts.
According to the IRS, for most taxpayers, MAGI is AGI as figured on their federal income tax return before subtracting any deduction for student loan interest.
FAQs about AGI
No, your AGI is not the same as your taxable income. You can find your AGI by first determining your total income for the year and then subtracting certain above-the-line deductions that you are eligible to take, such as student loan interest and health savings account contributions. Then subtract either the standard deduction or itemized deductions (if higher than the standard deduction) to arrive at your taxable income.
You can reduce your AGI by making tax-deductible contributions to a health savings account or a retirement account, such as a 401(k) or traditional IRA.
You can find your AGI listed on Line 11 of your completed tax return, Form 1040.
