What is Adjusted Gross Income?

For tax purposes, Adjusted Gross Income is the basis of an individual’s income tax calculations, before “below the line” deductions.

Adjusted Gross Income (AGI) is Gross Income (all of an individual’s earnings for the year) minus above-the-line deductions such as retirement plan contributions, education and medical expenses, Health Savings Accounts, alimony, military exemptions, and so on. After these adjustments, a person can take the standard federal deduction or itemize their other deductions. These are known as below-the-line deductions.

Modified Adjusted Gross Income (MAGI) is a different calculation, mainly used for purposes of determining IRA contribution amounts, and it can require a person to add back in some of the above-the-line deductions that were already subtracted from gross income.