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
jury duty pay remitted to employer
deduction for clean-fuel vehicles and certain refueling property
interest on education loans
higher education expenses
health savings accounts
For a full list, refer to this section of the Internal Revenue Code.
Be aware that your adjusted gross income is still not the income on which you will be taxed. Your taxable income is determined only after 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.