What Is AGI? A Simple Guide to Adjusted Gross Income
By Tax&Facts | Published on | Read: 3 Mins
When it comes to taxes, one of the most important numbers you’ll come across is your AGI — or Adjusted Gross Income. If you're filing a tax return in the U.S., this number plays a big role in how much tax you owe or get refunded. But what exactly is AGI, and why does it matter? Let’s break it down in simple terms.
What Is AGI?
Adjusted Gross Income (AGI) is your total gross income for the year minus certain deductions, also known as adjustments. Think of AGI as a filtered version of your income — not quite your total earnings, but not your final taxable income either. It’s the halfway point in the tax calculation process.
How Is AGI Calculated?
Basic Formula:
AGI = Gross Income − Adjustments (a.k.a. “above-the-line” deductions)
Gross Income includes:
- Wages, salaries, tips (W-2)
- Self-employment income
- Rental income
- Interest and dividends
- Capital gains
- Unemployment benefits
- Retirement distributions (e.g., 401(k), IRA)
Common AGI deductions:
- Student loan interest
- Traditional IRA contributions
- Health Savings Account (HSA) contributions
- Educator expenses
- Alimony (for divorces finalized before 2019)
- Half of self-employment tax
Why AGI Matters
Your AGI determines your eligibility for various tax credits, deductions, and federal assistance programs, including:
- The Child Tax Credit
- Education credits (e.g., American Opportunity Credit)
- Medical expense deductions (allowed only over a % of AGI)
- Stimulus payments or other relief programs
Lower AGI = More tax benefits.
Where Do I Find My AGI?
You can find your AGI on IRS Form 1040:
- Line 11 (for tax years 2021 and onward)
- You’ll also need your prior year’s AGI to e-file your current return.
Quick Recap
| Term | Meaning |
|---|---|
| Gross Income | Everything you earned before deductions |
| Adjustments | Certain deductions like student loan interest, IRA contributions |
| AGI | What’s left after subtracting adjustments from gross income |
FAQ Frequently Asked Questions (FAQ)
Q1: Is AGI the same as taxable income?
A1: No. AGI comes before standard or itemized deductions. Your taxable
income is calculated after subtracting those deductions from your AGI.
Q2: What is the difference between AGI and Modified AGI
(MAGI)?
A2: MAGI is AGI plus certain add-backs (like tax-exempt interest). It's used
for determining eligibility for things like Roth IRAs or certain tax
credits.
Q3: Can AGI be negative?
A3: Yes, if you have large losses (like from business or investments), your
AGI can be negative — which may reduce or eliminate your tax liability.
Q4: Does AGI affect my tax refund?
A4: Indirectly, yes. A lower AGI can help you qualify for more deductions
and credits, which may increase your refund or reduce the amount you owe.
Q5: Is AGI used by state tax returns too?
A5: Many states start their income tax calculation with your federal AGI,
then apply state-specific adjustments.
Article History
v1.0 (May 19, 2025): Initial publication of the article