Adjusted Gross Income (AGI)

Detailed Explanation

AGI is reported on Form 1040 line 11 and equals total income from all sources minus a defined list of "above-the-line" adjustments. Income items include wages, interest, dividends, capital gains, business income (Schedule C), rental income (Schedule E), K-1 pass-through income, retirement distributions, and unemployment compensation. Adjustments to income include the deductible portion of self-employment tax, self-employed health insurance, contributions to traditional IRAs and qualified retirement plans, the educator expense deduction, student loan interest (subject to phaseout), HSA contributions, and alimony paid under pre-2019 agreements. AGI is one of the most important numbers on a tax return because it gates eligibility for dozens of credits, deductions, and surcharges. The Child Tax Credit, the Lifetime Learning Credit, the American Opportunity Credit, the Saver's Credit, the IRA deduction, and Roth IRA contribution limits all phase out at AGI thresholds. AGI also drives the Net Investment Income Tax (3.8% above $200K single / $250K MFJ), the Additional Medicare Tax (0.9% above the same thresholds for earned income), and the IRMAA Medicare Part B and D premium surcharges (assessed two years after the AGI year). Modified Adjusted Gross Income (MAGI) starts with AGI and adds back items like the Foreign Earned Income Exclusion, tax-exempt interest, and excluded Social Security; different MAGI definitions apply for different rules.