Definition
Your total income for the year minus certain adjustments, such as traditional IRA contributions or student loan interest.
What it means
Adjusted gross income, or AGI, is a key number on your federal tax return. It starts with gross income from wages, self-employment, interest, dividends, capital gains, retirement distributions and other sources, then subtracts specific adjustments listed by the IRS. Common adjustments include deductible traditional IRA contributions, health savings account contributions, half of self-employment tax, student loan interest and educator expenses. AGI appears on Form 1040 and is used to figure eligibility for many credits and deductions, such as the earned income tax credit and Roth IRA contribution limits. Many programs use a related figure, modified AGI (MAGI), which adds back certain items; Medicare premium surcharges and ACA premium tax credits each use their own MAGI definition. Taxable income is AGI minus the standard or itemized deductions.
Example
Wages of $60,000 plus $500 of bank interest, minus a $5,000 deductible IRA contribution and $1,000 of student loan interest, give an AGI of $54,500.
Illustrative numbers only. Your situation will differ.