Adjusted gross income

Adjusted gross income (AGI) is a United States tax term for an amount used in the calculation of an individual's income tax liability. AGI includes all gross income adjusted by certain allowed deductions, and is an important benchmark determining certain other allowed benefits.

For example, most limitations on deductions or credits are determined based on either AGI or modified adjusted gross income (MAGI). MAGI is AGI modified by certain amounts specific to the given limitation.

Gross income includes wages, interest income, dividend income, income from certain retirement accounts, capital gains, alimony received, rental income, royalty income, farm income, unemployment compensation, and certain other kinds of income. AGI is the last number on the first page of the Form 1040, the standard U.S. income tax return form for individuals.

Deductions from gross income allowed in arriving at AGI (above the line deductions)

For the 2006 tax year, some examples of the deductions from gross income allowable in computing AGI include:

• Certain business expenses of reservists, performing artists, and fee-basis government officials;

• Health savings account deductions;

• Certain moving expenses;

• One-half of self-employment tax;

• Penalties on early withdrawal of savings;

• Alimony paid;

• Deduction for contribution to Individual Retirement Arrangements (IRAs); and

• Student Loan interest deduction.

The above list is not comprehensive. The deductions allowable in arriving at adjusted gross income should not be confused with itemized deductions such as home mortgage interest expense, medical expenses, property taxes, charitable contributions, etc.

External links

• IRS Webpage