What Is Adjusted Gross Income?

What Is Adjusted Gross Income?

AGI is your gross (or total) income minus a few adjustments to income. Gross income includes wages, dividends, capital gains, business income, retirement distributions and additional items like rental property income and unemployment benefits. Adjustments include student loan interest paid, alimony you've paid, educator expenses or contributions you've made to retirement accounts.

You may find it helpful to distinguish between these three types of income reported on your taxes:

• Gross income is all income that is not specifically tax-exempt.
• Adjusted gross income subtracts specific "above-the-line" adjustments like retirement contributions and new deductions for tip and overtime income.
• Taxable income is your AGI minus standard or itemized deductions.

What Is AGI Used For?

Adjusted gross income is most commonly used to qualify taxpayers for certain tax credits, such as the earned income tax credit. Here are some typical uses for AGI:

• Qualifying for tax credits and other benefits: Certain tax credits, including the earned income tax credit, child tax credit and the child and dependent care credit, use AGI or modified AGI to determine eligibility (or the size of your credit). Your AGI may determine whether or not you can contribute to a Roth IRA or deduct traditional IRA contributions, or take advantage of IRS tools like free tax filing.
• Calculating your taxable income: AGI is one of the key metrics that determines how much income tax you owe, both at the state and federal levels. Once you calculate your AGI, you can subtract your allowable deductions and exemptions to arrive at your tax liability.
• E-filing your own tax return: The IRS requires you to enter your prior year's AGI when you e-file your own taxes. You'll find your AGI on line 11a of your 2025 IRS Form 1040.
• Reporting income on the FAFSA: Applying for financial aid? AGI is a key factor in determining your income eligibility on the Free Application for Federal Student Aid (FAFSA).

Learn more: 401(k) and IRA Contribution Limits

How to Calculate AGI

You can use Schedule 1 (Form 1040) as a worksheet to calculate your AGI. Schedule 1 lists the income sources that go into your gross income calculation as well as adjustments you can deduct. The three basic steps you'll follow are:

1. Add up your income. Total up all sources of taxable income, including wages, self-employment income, unemployment benefits, tips, investment dividends, taxable interest, taxable alimony, royalties, capital gains, income from real estate investments and any other income that is not tax-exempt. Check IRS Publication 525 for details on what income does—and does not—need to be included in your gross income.

2. Find your adjustments to income. Review all the options for above-the-line deductions, which include student loan interest, retirement account contributions and educator expenses. Add up all the adjustments that apply.

   Here are the above-the-line adjustments listed on Schedule 1:

   • Educator expenses
   • Health savings account contributions
   • Moving expenses (for members of the armed forces)
   • Deductible portion of the self-employment tax
   • SEP, SIMPLE and IRA contributions
   • Health insurance payments (for self-employed people)
   • Early withdrawal penalties on savings
   • Alimony paid
   • Student loan interest
   • IRA contributions
   • Archer MSA deductions

3. Calculate AGI. The basic formula for calculating AGI is:

   $\mathrm{Gross\; Income}-\mathrm{Adjustments}=\mathrm{AGI}$

Example

Here's an example of how to calculate AGI using an annual wage of $72,000.

Add up your gross income. Use W-2 and 1099 forms to tabulate your income for the year from employment, self-employment, investments and savings.

Find adjustments to income. Check the list of adjustments on Schedule 1 and enter the correct amount for each item that applies.

Calculate AGI. Plug your income and adjustments into this formula to get your AGI.

$75,100 (income) - $3,135 (adjustments) = $71,965 (AGI)

Where to Find AGI on Tax Returns

If you want to find your most recent AGI, check your prior year's tax return. Adjusted gross income appears near the end of the income section on IRS Form 1040. On your 2025 Form 1040, AGI is line 11a; on the 2024 Form 1040, it appears on line 11.

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AGI vs. MAGI

In some cases, the IRS uses a modified adjusted gross income (MAGI) instead of AGI. For example, you'll use MAGI to determine your eligibility to contribute to a Roth IRA or to apply for adoption tax credits. What's the difference? Typically, MAGI is AGI with certain deductions added back. These deductions may include:

• Student loan interest
• Tuition and fees
• Foreign earned income exclusion
• Foreign housing exclusion or deduction
• Excludable savings bond interest
• Excluded employer-provided adoption benefits

Tip: MAGI is calculated differently for different applications. Whenever you're asked to provide MAGI, follow instructions on how to calculate it. The differences between one MAGI and the next are often slight, but you always want to be accurate.

How to Lower Your AGI

If you want to keep your AGI low to qualify for tax credits or retirement contributions, make sure you're excluding income you aren't required to report and maximizing your above-the-line deductions. Here's a quick list of tactics to consider:

• Contribute to your work retirement plan. Your 401(k) or 403(b) contributions are not included in your AGI.
• Open and fund a traditional IRA. You may deduct your contribution to a traditional IRA as an adjustment to income.
• Deduct student loan interest. You may be able to exclude up to $2,500 in student loan interest from your AGI.
• Claim health savings account contributions. If you have a health savings account, your contributions to it are deducted from your AGI calculation.
• Exclude nontaxable income. Some types of income don't need to be included when calculating your AGI, such as life insurance proceeds, child support received and most gifts and inheritances.
• Check new deductions for tips, overtime and new car loan interest. From 2025 to 2028, temporary above-the-line deductions for tip income, overtime pay and car loan interest (on a new loan) can potentially save you thousands.

Learn more: How the New Tax Law Changes Affect You

Frequently Asked Questions

The Bottom Line

Although AGI is a relatively simple concept, it may require a bit of research and math to calculate. If you don't have your most recent tax return or supporting documents like W-2 forms or 1099s, you can download your tax information using an online IRS account. As always, tax preparation software and a trusted tax advisor can be invaluable if you need help sorting out your income, navigating deductions and credits, and finalizing your tax return.