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Frequently Asked Questions

Adjusted Gross Income (AGI)

Adjusted gross income (AGI) is a special calculation of income that determines your eligibility for certain credits and deductions. Most phase out or cut off beyond a certain level of adjusted gross income.

You calculate AGI by subtracting certain above-the-line deductions from your total gross income, which includes all your income from any source. The deductions you can subtract from your gross income to arrive at your AGI include

trade and business deductions

losses from sale or exchange of property

deductions attributable to rents and royalties

pensions, profit-sharing, and annuity plans of self-employed individuals

retirement savings

alimony

jury duty pay remitted to employer

deduction for clean-fuel vehicles and certain refueling property

moving expenses

Archer MSAs

interest on education loans

higher education expenses

health savings accounts

For a full list, refer to this section of the Internal Revenue Code.

Your AGI is arrived at by subtracting above-the-line deductions from your gross income. Itemized deductions are then subtracted from your AGI to arrive at your taxable income. A lower AGI is important because it may help you qualify for more credits and deductions that you otherwise would not be able to take.

Be aware that your adjusted gross income is still not the income on which you will be taxed. Your taxable income is determined only by subtracting personal exemptions and itemized deductions from your AGI.

Make careful note of your AGI each year because when you file next year’s taxes you will need it, or your PIN, to authenticate your e-file.