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What Is Adjusted Gross Income (AGI)?

Adjusted gross income is your gross income minus certain payments you’ve made during the year.
Feb. 22, 2019
Income Taxes, Personal Taxes, Taxes
What Is Adjusted Gross Income (AGI)?
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Adjusted gross income (AGI) is your gross income — which includes wages, dividends, alimony, capital gains, business income, retirement distributions and other income — minus certain payments you’ve made during the year, such as student loan interest or contributions to a traditional individual retirement account or a health savings account.

How does Adjusted Gross Income affect me?

Your AGI is often the starting point for calculating your tax bill. From there, you’ll make various adjustments and subtract your allowable deductions to find the amount on which you’ll pay tax: That’s your taxable income. You’ll see the term “adjusted gross income (AGI)” repeated throughout your tax forms.

  • Your state tax return might use your federal AGI as a starting point.
  • AGI is the basis on which you might qualify for many deductions and credits. For example, you may be able to deduct unreimbursed medical expenses, but only when they’re more than 7.5% of your AGI. So the lower your AGI, the greater the deduction.
  • If you file taxes online, the software will calculate your AGI for you.

» MORE: Really get to know your money — how much you have and how you’re spending it.

What is Modified AGI, or MAGI?

If you’re filing Form 1040 and itemizing so that you can take certain deductions, you may also have to calculate your MAGI. It too can be a baseline for determining the phaseout level of some credits and tax-saving strategies, and the formula for MAGI can depend on the type of tax benefit it applies to.