Adjusted Gross Income (AGI): Complete 2025 Guide to Understanding & Calculating AGI

Learn what AGI means, how to calculate it, where to find it, and how it impacts

your tax refund, credits, and deductions.

What Is Adjusted Gross Income (AGI)?

Understanding the foundation of your tax calculation

Adjusted Gross Income (AGI) is your total income minus specific IRS-approved adjustments. It's one of the most important numbers on your tax return because it determines:

  • Your eligibility for tax credits

  • Whether you can take certain deductions

  • How much of your Social Security is taxable

  • Whether you qualify for education credits

  • Your overall taxable income

AGI is the starting point the IRS uses before calculating your final tax bill.

Why Your AGI Matters More Than You Think

How this number impacts your financial life beyond taxes

Larger Tax Credits

A lower AGI can result in a larger Earned Income Tax Credit and other refundable credits.

Reduced Taxable Benefits

Lower AGI means less of your Social Security benefits may be subject to taxation.

Student Loan Benefits

Income-based repayment plans use your AGI to calculate monthly payment amounts.

Income Types That Count Toward AGI

What the IRS considers when calculating your total income

AGI Formula

Total Income – Adjustments = Adjusted Gross Income (AGI)

This simple formula is the foundation of your tax return. Let's break down each component.

Total Income Includes:

  • W-2 wages

  • 1099 contractor income

  • Business profits

  • Rental income

  • Interest & dividends

  • Unemployment income

  • Capital gains

  • Taxable Social Security

Reduced Taxable Benefits

  • HSA contributions

  • IRA contributions

  • Student loan interest

  • Educator expenses

  • Half of self-employment tax

  • Self-employed health insurance

  • Certain alimony payments (older divorces)

  • Taxable Social Security

How to Calculate Your AGI

The step-by-step formula to determine your adjusted gross income

Your AGI includes almost all forms of taxable income, such as:

  • Salary or hourly wages

  • Commission income

  • Tips

  • Freelance or gig-worker earnings

  • Business income or loss

  • Real estate rental income

  • Royalty income

  • Unemployment compensation

  • Retirement plan withdrawals

AGI does not include tax-exempt items (e.g., municipal bond interest).

AGI vs. Taxable Income: What's the Difference?

Understanding these two critical tax concepts

Adjusted Gross Income (AGI)

Your income after allowed adjustments but before deductions.

Determines eligibility for tax benefits

Taxable Income

Your AGI minus either the standard deduction or itemized deductions.

Determines your final tax bill

Your AGI determines eligibility. Your taxable income determines your final tax bill.

Where to Find Your AGI on Your Tax Return

Locating this critical number on your tax documents

Form 1040 (2024): Line 11

You can find your AGI on Form 1040 (2024): Line 11

If you are e-filing, you must enter last year's AGI for identity verification.

AGI Calculation Example

A real-life breakdown of how AGI is calculated

Example Taxpayer:

$70,000 W-2 wages

$2,500 interest income

Total Income = $72,500

Adjustments:

$3,000 IRA contribution

$1,500 student loan interest

Total Adjustments = $4,500

Final AGI Calculation:

$72,500 (Total Income) − $4,500 (Adjustments) = $68,000 AGI

This lower AGI may increase credit eligibility and lower taxable income.

Frequently Asked Questions About AGI

Quick answers to common AGI questions

Is AGI the same as taxable income?

No. AGI is calculated before deductions. Taxable income is calculated after deductions.

Does AGI include Social Security?

Only the taxable portion of Social Security counts toward AGI.

How can I lower my AGI?

You can reduce AGI through adjustments like HSA contributions, IRA contributions, student loan interest, and self-employment deductions.

Where do I find my AGI for e-filing?

On Form 1040, line 11 from your previous year's return.

Want Help Calculating Your AGI or Filing Your Taxes?

Locating this critical number on your tax documents

Want Help Calculating Your AGI

or Filing Your Taxes?

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© 2023 TaxPro Guide. This information is for educational purposes only. Consult a tax professional for personalized advice.