Adjusted Gross Income (AGI) definition
Adjusted Gross Income (AGI) is a taxpayer’s total income minus allowable adjustments.
Adjusted Gross Income (AGI) is the total of a taxpayer’s income from all sources, minus any allowable adjustments to income, as listed on Schedule 1 of Form 1040. Adjustments to income may include things like contributions to a traditional Individual Retirement Account (IRA) or student loan interest.
AGI is calculated before either the standard deduction or itemized deductions are applied.
Adjusted gross income vs. modified adjusted gross income
Modified Adjusted Gross Income (MAGI) is AGI with some of the adjustments to income added back (or treated differently) for the purpose of calculating eligibility for certain tax benefits.
A taxpayer’s MAGI may include income such as interest, dividends, and IRA distributions. MAGI also adds back certain items normally excluded from income, like tax-exempt interest or foreign income exclusions.
MAGI and AGI may be the same for many taxpayers.
Some of the tax benefits a taxpayer may need to calculate their MAGI for include:
- Credits such as the Child Tax Credit and the Adoption Tax Credit
- Deductions for contributions to traditional IRAs
- Exclusions for specific types of income, like US savings bond interest used for education
Depending on a person’s MAGI, the amount of each credit, deduction, or exclusion they qualify for may be reduced, phased out, or disallowed.
