Adjusted Gross Income (AGI)
Your gross income minus specific adjustments such as student loan interest, IRA contributions, and self-employment tax. AGI is the starting point for calculating your taxable income.
Adjusted Gross Income (AGI) is one of the most important numbers on your tax return. It equals your total gross income — wages, salaries, investment earnings, retirement distributions, and other income — minus a specific set of deductions the IRS calls "adjustments to income" or above-the-line deductions.
Common adjustments include contributions to a Traditional IRA, student loan interest (up to $2,500), half of self-employment tax, and HSA contributions. These adjustments are subtracted before you decide whether to take the standard deduction or itemize.
Your AGI matters because it determines eligibility for many tax credits and deductions. For example, the Child Tax Credit, Earned Income Credit, and education credits all phase out based on AGI thresholds. For 2025, knowing your AGI helps you plan contributions, deductions, and withholding to minimize your overall tax bill.
How it works
Adjusted Gross Income is a subtotal that sits between your gross income and your taxable income. You start with every dollar of income the tax code makes you count — wages, self-employment earnings, interest, dividends, retirement distributions, and more — and then subtract a specific list of above-the-line deductions the IRS calls adjustments to income. What is left is your AGI. It is not the amount you actually pay tax on; that step comes later, after you subtract the standard deduction or your itemized deductions. AGI exists as its own line because so many other parts of the tax code — credits, deduction limits, contribution eligibility — are measured against it rather than against your raw gross income or your final taxable income.
You will find AGI on your Form 1040, calculated after you report income on the front of the return and after you complete Schedule 1 for adjustments like IRA contributions, student loan interest, and the deductible half of self-employment tax. Software and paper filers alike compute it the same way: total income minus Schedule 1 adjustments. Once you have that number, the form asks you to choose between the standard deduction and itemizing on Schedule A before arriving at taxable income. Many other forms in your return — the Child Tax Credit worksheet, education credit forms, Roth IRA contribution worksheets — pull your AGI (or a modified version of it) from this same line rather than recalculating income from scratch.
People often confuse AGI with taxable income, but they are two different subtotals separated by the standard or itemized deduction. AGI also is not the same as Modified AGI (MAGI), which several credits and phase-outs use instead — MAGI adds back specific items like foreign earned income exclusions that AGI removes. Because so many benefits phase out based on AGI or MAGI, taxpayers close to a threshold sometimes use above-the-line deductions like IRA or HSA contributions deliberately to bring AGI down and preserve eligibility for a credit, even when the immediate tax savings from the deduction itself would be modest.
Example: from gross income to AGI
Suppose you earn $70,000 in wages and $500 in interest income during the year, for gross income of $70,500. You also paid $1,800 in student loan interest and contributed $3,000 to a Traditional IRA during the year — both above-the-line deductions.
Subtracting the $1,800 and $3,000 from your $70,500 gross income leaves an AGI of $65,700. That AGI, not your original $70,500, is the number your tax software will use to check whether you qualify for credits with income limits, before it moves on to subtract your standard or itemized deduction.
Frequently asked questions
What is the difference between AGI and gross income?
Where do I find my AGI on my tax return?
Why does AGI matter if it is not my final tax bill?
Related Terms
Gross Income
The total of all income you receive during the year before any deductions or adjustments. Includes wages, interest, dividends, rental income, and business income.
Taxable Income
The portion of your income that is actually subject to federal income tax, calculated by subtracting the standard or itemized deduction from your AGI.
Above-the-Line Deduction
Deductions subtracted from gross income to arrive at AGI, available regardless of whether you itemize. Examples include IRA contributions, student loan interest, and HSA contributions.
Standard Deduction
A fixed dollar amount that reduces your taxable income, available to all filers who do not itemize. For 2025, it is $15,750 for single filers and $31,500 for married filing jointly (OBBBA-adjusted).