What is AGI?
Your Adjusted Gross Income (AGI) is your total gross income minus specific deductions called "above-the-line" adjustments. The IRS uses your AGI as the foundation for calculating your taxable income, determining your tax bracket, and deciding which tax credits and deductions you qualify for.
AGI is reported on line 11 of IRS Form 1040. It is calculated before the standard deduction or itemized deductions are applied.
Uses of AGI
Your AGI determines:
- Taxable income — your AGI minus the standard or itemized deduction equals your taxable income
- Tax bracket — your marginal federal income tax rate is based on taxable income, which starts with AGI
- Eligibility for tax credits — including the Earned Income Credit, Child Tax Credit, and charitable deductions
- Eligibility for itemized deductions — such as unreimbursed medical expenses (only amounts over 7.5% of AGI) and casualty losses
- Modified AGI (MAGI) — your AGI is the starting point to calculate MAGI, which determines eligibility for Roth IRA contributions, Health Care Premium Tax Credits, and more
- IRS identity verification — your prior year AGI is used to digitally sign your e-filed tax return
How to Calculate AGI?
The formula is straightforward:
AGI = Gross Income − Above-the-Line Adjustments
Gross Income Sources
Gross income includes all taxable income you receive during the year:
- Wages, salaries, and tips — reported on your W-2 form
- Business or self-employment income — net profit from Schedule C
- Interest and dividends — from savings accounts, bonds, and stock investments
- Capital gains and losses — from selling stocks, real estate, or other assets
- Taxable Social Security benefits — up to 85% of benefits may be taxable
- Rental income — from real estate properties you own
- Pension and IRA distributions — taxable retirement account withdrawals
- Unemployment compensation — fully taxable at the federal level
- Alimony received — only for divorces finalized before January 1, 2026
- Other income — prizes, gambling winnings, jury fees, etc.
Above-the-Line Adjustments (Deductions)
These deductions reduce your gross income before arriving at AGI. Anyone can claim them if eligible — you do not need to itemize:
- Educator expenses — up to $250 for classroom supplies paid out-of-pocket by K-12 teachers
- Traditional IRA contributions — up to $7,000 (or $8,000 if age 50 or older) for tax year 2024
- Student loan interest — up to $2,500 of interest paid on qualified student loans
- Health Savings Account (HSA) contributions — pre-tax contributions made outside of payroll
- Half of self-employment tax — the employer-equivalent portion of SE tax (automatically applied at 50%)
- Self-employed health insurance premiums — 100% of premiums paid for yourself, spouse, and dependents
- Alimony paid — only for divorce agreements finalized before January 1, 2026
- Other adjustments — moving expenses (military), tuition and fees, etc.
AGI Calculation Example
Suppose you have the following income and deductions:
- Wages: $75,000
- Freelance business income: $15,000
- Interest and dividends: $2,000
- IRA contribution deduction: $7,000
- Student loan interest: $1,500
- HSA contribution: $3,000
Gross Income = $75,000 + $15,000 + $2,000 = $92,000
Total Adjustments = $7,000 + $1,500 + $3,000 = $11,500
AGI = $92,000 − $11,500 = $80,500
AGI vs. Gross Income vs. Taxable Income
| Term | Definition | Form 1040 Line |
|---|---|---|
| Gross Income | All taxable income before any deductions | Various lines (1a–8) |
| Adjusted Gross Income (AGI) | Gross income minus above-the-line adjustments | Line 11 |
| Taxable Income | AGI minus standard deduction (or itemized deductions) | Line 15 |
FAQs
What is not included in AGI?
Some income is excluded from gross income entirely and never reaches AGI: gifts and inheritances, child support received, workers' compensation, life insurance proceeds, and qualified scholarships. These are not reported on your tax return.
How does a lower AGI help me?
A lower AGI reduces your taxable income and can unlock higher deductions tied to AGI — for example, medical expenses are only deductible above 7.5% of AGI. It also improves eligibility for income-tested credits and benefits, and may reduce the phaseout of above-the-line deductions themselves.
Is AGI the same as my W-2 box 1 wages?
No. Your W-2 box 1 reports wages, which are just one component of gross income. AGI also includes other income sources and then subtracts eligible adjustments.
Can I use this calculator for currencies other than USD?
Yes. This AGI calculator supports 12 major world currencies including the US Dollar (USD) and Russian Ruble (RUB). The IRS limits shown (e.g., $250 educator expense cap, $2,500 student loan interest cap) are in USD. If you earn in another currency, use those fields as reference only; official IRS rules apply only to US taxpayers.
What is the difference between AGI and MAGI?
Your AGI is the base. MAGI (Modified AGI) adds certain deductions back to your AGI — specifically for each government program or tax benefit that uses its own definition. For most people, MAGI equals AGI. See our MAGI Calculator to compute your Modified Adjusted Gross Income.