Definition
Adjusted Gross Income (AGI) is your total gross income minus specific “above-the-line” deductions. It appears on line 11 of Form 1040 and is one of the most important numbers in your tax return.
What’s Included in Gross Income?
- Wages and salary
- Self-employment income
- Interest and dividends
- Capital gains
- Rental income
- Alimony (pre-2019 agreements)
- Unemployment compensation
- Taxable Social Security benefits
Above-the-Line Deductions That Reduce AGI
These deductions are subtracted before you take the standard deduction:
| Deduction | 2024 Limit |
|---|---|
| Traditional IRA contributions | $7,000 ($8,000 age 50+) |
| Student loan interest | $2,500 |
| Educator expenses | $300 |
| Health Savings Account (HSA) | $4,150 single / $8,300 family |
| Self-employed health insurance | 100% of premiums |
| Alimony paid (pre-2019 agreements) | Actual amount |
| Moving expenses (military only) | Actual expenses |
Why AGI Matters
AGI is the gatekeeper for many tax benefits. Lower AGI = more benefits you qualify for:
- Medical deductions: Only expenses above 7.5% of AGI are deductible
- Charitable deductions: Limits based on AGI
- Roth IRA eligibility: Phases out at $150,000–$165,000 (single) in 2025
- Student loan interest deduction: Phases out at $75,000–$90,000 (single)
- Premium Tax Credit: Based on AGI vs. Federal Poverty Level
- EITC: Reduced at higher AGI levels
Modified AGI (MAGI)
Many income limits use MAGI, which is AGI with certain deductions added back. Common MAGI add-backs: student loan interest, IRA deductions, foreign earned income exclusion. Always check whether a rule uses AGI or MAGI.