Takeaways
- Adjusted Gross Income (AGI) is your gross income, less qualifying payments.
- The Internal Revenue Service uses AGI to determine how much taxes you owe.
- AGI is located on line 11 of Form 1040, your U.S. individual income tax return.
- AGI is critical in determining eligibility for tax credits and retirement plan contributions.
- Modified AGI is your AGI with several exceptions added back; most taxpayers’ AGI is equal to or very similar to their Modified AGI.
What Is Adjusted Gross Income?
Adjusted gross income is the number the IRS uses to determine your income taxes. Your AGI is your total gross income minus certain allowable adjustments explicitly defined by the IRS.[1]
To calculate AGI, take your annual gross earnings and subtract allowable deductions – like your Traditional IRA retirement contributions, student loan interest, and health savings account contributions – you made throughout the year.
You can calculate your taxable income by taking your AGI and subtracting either the standard or itemized deduction. Your taxable income is used to determine your taxes using the federal income tax rates and brackets.
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How to Calculate Adjusted Gross Income
To determine your adjusted gross income, you need to add up all the income you have earned throughout the year – salary, bonus, freelance work, side hustle income. The total is your gross income.
Plug and play to calculate your gross income with our Gross Income Calculator. Here is a list of familiar (hopefully) sources of gross income.:
- Annual salary
- Yearly bonuses
- Business income
- Rental property income
- Investment income
- Unemployment income
- Retirement income
- Other sources of income
After figuring out your annual gross income, you begin to subtract the following allowable qualifying payments or expenses: [2]
- Deductible Traditional IRA contributions
- Health Savings Account (HSA) contributions
- Student loan interest
- Paid alimony
- Business expenses (only certain expenses)
- Educator expenses
- Moving expenses (only the military)
The best online software programs help you aggregate your gross income and determine whether you qualify for certain payments and expenses. These programs streamline filing your annual taxes.
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Where Is AGI on Form 1040?
Form 1040 is the individual U.S. tax return form, which can be found on the IRS website. Adjusted gross income is located on line 11 of Form 1040.
Why Adjusted Gross Income Matters
Adjusted gross income is significant because it serves as the official starting number for calculating your taxable income. After determining your AGI, you will subtract either your standard or itemized deductions, usually depending on which one is higher.
2025 Standard Deductions
| Tax Filing Status | Deduction Amount |
|---|---|
| Single | $15,000 |
| Married Filing Separately | $15,000 |
| Head of Household | $22,500 |
| Married Filing Jointly | $30,000 |
| Qualifying Serving Spouse | $30,000 |
Source: Internal Revenue Service [2]
Standard deductions depend on your tax filing status, while your itemized deductions depend on your financial situation for that year. If your itemized deductions, like qualifying expenses such as mortgage interest, donations to charities, or medical expenses, are higher than your standard deduction, you may use itemized deductions.
AGI also calculates what tax credits or deductions you might qualify for. For example, the earning income tax credit used earned income and AGI to determine eligibility.
What Is Modified AGI (MAGI)?
Modified adjusted gross income is your AGI with IRS-stipulated deductions added back.
After you have calculated your gross income and adjusted gross income, the next step is to calculate your modified AGI. MAGI is important in determining whether you qualify for or phase out different tax credits or other saving strategies.
For example, in 2025, to claim the retirement savings contribution credit, your MAGI must not exceed $39,500 as a single filer, $79,000 if married filing jointly, or $59,250 as head of household.[3]
MAGI also matters when you are saving for retirement. MAGI determines what you can deduct from your traditional IRA contribution or contribution limits to your Roth IRA.
Smart Summary
Adjusted gross income is your income(s) for the tax year minus allowable adjustments. AGI is the starting point for calculating your taxable income for the year. Once you select whether you will take the standard deduction or itemize your deductions, you can get an accurate sense of whether you will have a tax liability or tax refund.
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(1) Internal Revenue Service. Definition of adjusted gross income. Last Accessed March 31, 2025.
(2) Internal Revenue Service. Adjusted gross income. Last Accessed March 31, 2025.
(3) Internal Revenue Service. Publication 505 (2025), Tax Withholding and Estimated Tax. Last Accessed March 31, 2025.
