Key takeaways

• Adjusted gross income (AGI) is your total gross income minus certain adjustments, including eligible IRA, HSA, and student loan interest deductions.
• AGI is used to determine your eligibility for certain tax credits, deductions, and other benefits.
• Modified AGI (MAGI) takes your AGI and applies further adjustments to determine your eligibility for specific tax benefits.

Your AGI can be one of the most important figures on your federal tax return. It’s a starting point to help calculate your taxable income and determine whether you’re eligible for certain tax credits, deductions, and other benefits.

Learning how to correctly calculate your AGI and modified AGI (MAGI) can help you avoid missing out on any potential tax savings. Here are some things to know about AGI, how to calculate it, and how it differs from MAGI or taxable income.

What is adjusted gross income (AGI)?

Adjusted gross income (AGI) is your total annual income, or “gross income,” minus certain adjustments. Your AGI is used to determine eligibility for certain income-based tax deductions and credits. It’s also used to calculate monthly payments for income-driven student loan repayment plans.¹

AGI is calculated using the following formula:

AGI = gross income - adjustments to income

Gross income includes all sources of taxable income, including wages, self-employment income, dividends and capital gains, and retirement distributions.² Adjustments, also referred to as “above-the-line deductions,” allow taxpayers to deduct certain expenses from their gross income. Common types of adjustments include retirement contributions, student loan interest, and certain self-employment expenses, to name a few.

Read more: 2026 tax deductions that could reduce your taxable income

Why is AGI important?

When filing your tax return, it’s important to calculate your AGI accurately (if you’re using tax software, it will calculate it for you). If you incorrectly calculate your AGI, you can miss out on certain tax savings or accidentally claim a credit or deduction you aren’t eligible for. If this happens, you’ll be responsible for paying it back to the IRS.

What income is included in AGI?

The following forms of taxable income are included in your AGI when applicable:³

• Taxable wages, tips, and employee benefits
• Self-employment income
• Income from side jobs
• Business and rental income
• Investment income, including capital gains, interest, and dividends
• Benefits, including retirement, unemployment, and Social Security
• Canceled debts
• Alimony payments received
• Court awards and damages
• Gambling winnings, prizes, and awards

Adding these together results in your gross income for the year. From there, certain adjustments will be subtracted from this amount to calculate your AGI.

Read more: Is Social Security income taxable?

What adjustments can reduce AGI?

Some of the most common income adjustments used to calculate AGI include (but aren’t limited to):⁴

• Educator expenses
• HSA contributions
• Moving expenses for military members
• Deductible portion of the self-employment tax
• Self-employed retirement plan contributions
• Self-employed health insurance premiums
• Alimony payments paid
• Deductible contributions to an IRA or other self-employed retirement plans
• Student loan interest

Not all these adjustments may apply to your situation. You can review the full list to help ensure that you’re taking advantage of any that may be relevant.

How to calculate AGI

AGI is calculated using these three steps:⁵

1. Calculate gross income
2. Calculate adjustments
3. Subtract the adjustments from gross income.

If you use tax software to file your annual tax return, then it can calculate your AGI for you based on the information you provide. You can find this calculated AGI on line 11, page 1, of the Individual Tax Return Form 1040.⁶

Step 1: Calculate your gross income

Add up all of your taxable income for the year. When filing your taxes, enter this number on line 9 of your Form 1040, the individual federal tax return form.⁷ If you aren’t sure if something is considered income, the IRS provides a comprehensive list on its website.⁸

Step 2: Calculate your total adjustments

Add up all your adjustments, which can be found on Schedule 1 of Form 1040. When filing your taxes, enter this number on line 26 of Schedule 1 and on line 10 of Form 1040. ⁹

Step 3: Subtract all adjustments from your gross income

Subtract the total amount of your adjustments from your gross income. The result will be your AGI.

When filling out Form 1040, you’ll take line 9 (your total income) minus line 10 (your total adjustments from Schedule 1). Enter the result on line 11 of Form 1040 to report your AGI for the tax year.¹⁰

Example of an AGI calculation

Say that you make $100,000 a year in wages, plus an additional $5,000 in investment earnings. Your total gross income for the year would be $105,000. Now, let’s say you contributed $7,500 to your IRA and paid $500 in student loan interest that year. Your total adjustments would be $8,000. If you subtract your total adjustments ($8,000) from your gross income ($105,000), then your AGI for the year would be $97,000.

Understanding modified adjusted gross income (MAGI)

Your modified adjusted gross income (MAGI) is your AGI with certain adjustments added or removed.

MAGI is used to determine your eligibility for several different things, including:¹¹

• Eligibility to contribute to a Roth IRA
• Eligibility to deduct your traditional IRA contributions
• Eligibility for health insurance premium tax credits
• Eligibility for certain education credits
• Eligibility for the Child Tax Credit
• Eligibility to deduct your student loan interest

Read more: Tax credits: Everything you need to know

MAGI can be a confusing concept because it has several different uses, and it’s calculated in a different way for its different uses. Additionally, it’s not a number that appears on your tax return, making it difficult to find on your own. If you’re confused about what your MAGI is or whether you’re eligible for certain deductions or credits, you should consult a tax professional.

Understanding adjusted gross income (AGI), gross income, and taxable income

Your AGI, gross income, and taxable income are three of the most important figures you’ll need when filing your tax return. And while they all sound similar, they’re actually very different.

First, your gross income is your total amount of income that may be subject to taxation. It includes your wages, interest, dividends, capital gains, self-employment income, and more. It’s calculated before any deductions or adjustments to income and, therefore, doesn’t necessarily control your final tax liability. This number is generally higher than your AGI.¹²

Next, your taxable income refers to the portion of your income that is ultimately taxed. While your gross income is generally higher than your AGI, your taxable income is generally lower. You calculate your taxable income by finding your AGI and then subtracting any deductions you’re eligible for, along with the qualified business income (QBI) deduction (if you’re eligible).

Once you calculate your taxable income, you’ll be able to calculate your actual tax liability using the IRS tax brackets. Remember, the marginal tax brackets are progressive, which means all of your income isn’t taxed at your highest marginal tax rate. Instead, each dollar of income is taxed starting at the lower rate brackets that correspond to the amount of income needed to fill that bracket. As your taxable income increases, so do the potential tax rates that apply to the higher dollars of your taxable income. For example, you may find that some of your income is taxed at 10%, some at 12%, and so on up the bracket. There are also preferential tax brackets that apply to items like Long-term Capital Gain income and Qualified Dividend income as well.

When you’re filing your taxes — and even throughout the year — it’s worth looking for ways to reduce your taxable income. Not only will this reduce the portion of income that you pay taxes on, but it could also help push you into a lower tax bracket.

Read more: Understanding & navigating federal taxes

Importance of previous year's AGI

There may be situations where you need to know your previous year’s AGI. It’s often used as a verification tool for the IRS, such as when you’re filing your taxes electronically. For that reason (and others), it’s important to maintain copies of your previous tax returns and know where to access this information.

To find your prior-year AGI, check your:¹³

• Previous tax return
• Prior tax-preparation provider
• IRS Online Account
• IRS tax return transcript

If you aren’t able to provide your previous year’s AGI when asked for it, you may run into obstacles when electronically filing your taxes.

Significance of adjusted gross income (AGI) in state taxes

Your AGI can be an important figure in determining your state taxable income. Many states use federal AGI as a starting point for state taxable income, then apply state-specific additions, subtractions, deductions, or exemptions. Like the federal tax code, your AGI may also be the factor that determines your eligibility for certain state deductions and credits.¹⁴

When you’re completing your state tax return, do not assume everything is the same as on your federal return. You must thoroughly read your tax forms and the information that’s needed. Each state has its own unique tax code and laws, so it’s important to ensure you’re completing your state returns accurately.

Conclusion

Because of the importance of your AGI, you must ensure you’re calculating it accurately when filing your tax return. If you’re unsure whether you’ve calculated your AGI correctly or you want someone else to do it on your behalf, consider hiring a tax professional or using tax filing software to complete your tax return.

1 Federal Student Aid, "Income-Driven Repayment Plans," Accessed August 2026.

2 IRS, "Taxable income," May 2026.

3 Ibid.

4 IRS, "Modified adjusted gross income," June 2026.

5 Ibid.

6 IRS, "About Form 1040, U.S. Individual Income Tax Return," July 2026.

7 Ibid.

8 IRS, "Taxable income," May 2026.

9 IRS, "About Form 1040, U.S. Individual Income Tax Return," July 2026.

10 Ibid.

11 IRS, "Modified adjusted gross income," June 2026.

12 IRS, "Taxable income," May 2026.

13 IRS, "How long should I keep records?," June 2026.

14 Tax Policy Center, "How do state individual income taxes conform with federal income taxes?" accessed August 2026.

RO5837711-0826