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- Your adjusted gross income, or AGI, is your total income minus specific deductions.
- You adjusted gross income determines your eligibility for certain tax credits and is a starting point for calculating the amount of tax you owe.
- To find your AGI, take your gross income and subtract above-the-line adjustments, like retirement contributions and student loan interest.
If you pay US federal 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, and is often used by the IRS to determine whether you qualify for certain tax deductions and credits. It's also used in the calculation to determine how much tax you owe.
What is AGI, and how do I calculate it?
It's important to understand that AGI is different from gross income. Gross income is the total amount of money you receive in any given year, including wages, tips, capital gains, business income, and retirement distributions.
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 include:
- Student-loan interest
- Contributions to a qualified retirement plan or traditional IRA
- Health Savings Account contributions
- The employer portion of self-employment taxes
- Health insurance premiums for self-employed people
- The penalty on early savings withdrawals
- Moving expenses for active military members
What is modified adjusted gross income?
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 additional tax breaks, like the tuition and fees deduction. According to the IRS, for most taxpayers, MAGI is adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest.
How AGI figures into the amount of tax you owe
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 — $13,850 for single filers and $27,700 for married joint filers in the 2023 tax year — or itemized deductions (like mortgage interest or state and local taxes), whichever is higher. This brings you to your total taxable income.
Your taxable income is what the the IRS applies to the tax brackets to determine your tax liability.
Adjusted gross income FAQs
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.
AGI is not the same as wages on a W-2. The wages section of your W-2 only shows your unadjusted gross income from your job.
Gross income is the total amount of income you had in a year from all sources such as wages, bonuses, capital gains, and interest. Adjusted gross income is your gross income minus certain deductions and adjustments that you qualify for.
You can reduce your AGI by making deductible contributions such as to a health savings account or a retirement account such as a 401(k) or IRA.
Gross income is the total income from a company that includes all revenue and sources of income. Net income, sometimes referred to as net earnings, is the total gross income minus all expenses, taxes, and deductions. Gross income is higher than net income and includes total revenue or income, whereas net income refers to net profits after all expenses, taxes, and deductions are taken out. Your personal net income is typically your take-home pay.