[{"@context":"https:\/\/schema.org\/","@type":"Article","@id":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/what-is-adjusted-gross-income\/#Article","mainEntityOfPage":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/what-is-adjusted-gross-income\/","headline":"What Is Adjusted Gross Income?","name":"What Is Adjusted Gross Income?","description":"Adjusted gross income (AGI) is a taxpayer\u2019s gross income minus certain adjustments to income...","datePublished":"2021-08-22","dateModified":"2021-10-08","author":{"@type":"Person","@id":"https:\/\/moneydoneright.com\/author\/logan-allec\/#Person","name":"Logan Allec, CPA","url":"https:\/\/moneydoneright.com\/author\/logan-allec\/","identifier":4,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/6e74dd0453a5871d1dcfde6d40d9494765ca8bfdb01927cefee4564d4bee9075?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/6e74dd0453a5871d1dcfde6d40d9494765ca8bfdb01927cefee4564d4bee9075?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"Money Done Right","logo":{"@type":"ImageObject","@id":"https:\/\/moneydoneright.com\/wp-content\/uploads\/Money-Done-Right-Personal-Finance-and-Investing-Blog.png","url":"https:\/\/moneydoneright.com\/wp-content\/uploads\/Money-Done-Right-Personal-Finance-and-Investing-Blog.png","width":488,"height":60}},"image":{"@type":"ImageObject","@id":"https:\/\/moneydoneright.com\/wp-content\/uploads\/what-is-adjusted-gross-income.jpg","url":"https:\/\/moneydoneright.com\/wp-content\/uploads\/what-is-adjusted-gross-income.jpg","height":460,"width":1900},"url":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/what-is-adjusted-gross-income\/","about":["Personal Taxes"],"wordCount":864,"keywords":["schema"],"articleBody":"Adjusted gross income (AGI) is a taxpayer\u2019s gross income minus certain adjustments to income allowed by the IRS.\u00a0 These adjustments do not include itemized deductions.Learn what adjusted gross income is and how to calculate it.Table of ContentsToggleDefinition and Example of Adjusted Gross IncomeHow Adjusted Gross Income WorksAdjusted Gross Income vs. Taxable IncomeAdjusted Gross Income vs. Modified Adjusted Gross IncomeAdjusted Gross Income: ConclusionDefinition and Example of Adjusted Gross IncomeAdjusted gross income is a tax calculation that adds up a taxpayer\u2019s total income and then subtracts from their total income certain adjustments allowed by the tax code.For example, if a taxpayer makes $50,000 a year from their job and paid $2,000 of student loan interest during the year, their adjusted gross income would be $48,000.How Adjusted Gross Income WorksAdjusted gross income is calculated on Line 11 of Form 1040.Once it has been calculated, adjusted gross income may be used to calculate other components of a taxpayer\u2019s tax return.Calculation of Adjusted Gross IncomeAdjusted gross income is the sum of all of a taxpayer\u2019s items of income as well as certain taxpayer-favorable adjustments allowed by the tax code such as the health savings account deduction, the deduction for moving expenses, and the student loan interest deduction.However, adjusted gross income does not include a taxpayer\u2019s qualified business income deduction or itemized deductions; these amounts are subtracted from adjusted gross income to determine taxable income.Adjusted Gross Income and Other Tax CalculationsOnce adjusted gross income has been calculated, it may be used to calculate the amount of other tax benefits a taxpayer is eligible for.For example, if a taxpayer paid medical and dental expenses during the year, they may be eligible to take the medical expense deduction if they itemize their deductions.However, a taxpayer\u2019s medical expenses are only deductible to the extent that they exceed 7.5% of their adjusted gross income.So in order for a taxpayer to determine one\u2019s deductible medical expenses, they must first calculate their adjusted gross income; this is why adjusted gross income is calculated before itemized deductions because the calculation of some itemized deductions depends on a calculator\u2019s adjusted gross income.Other tax items that depend on a taxpayer\u2019s adjusted gross income or some modification of it include the taxable amount of Social Security income, the Child Tax Credit, and the Earned Income Tax Credit.Adjusted Gross Income vs. Taxable IncomeAdjusted gross income is different from taxable income.While adjusted gross income is used to calculate other tax items, taxable income is the income amount used to actually calculate a taxpayer\u2019s tax liability for the year.Here is the formula showing the relationship between a taxpayer\u2019s adjusted gross income and their taxable income:Adjusted Gross Income– Standard Deduction or Itemized Deductions– Qualified Business Income Deduction= Taxable IncomeAdjusted Gross Income vs. Modified Adjusted Gross IncomeSometimes, the calculation of a particular tax item for a taxpayer depends not on adjusted gross income as reported on the taxpayer\u2019s tax return, but on a modification of the taxpayer\u2019s adjusted gross income.This modification is referred to as modified adjusted gross income (MAGI), and its calculation can differ based on the tax item being calculated.MAGI and Student Loan Interest DeductionFor purposes of calculating a taxpayer\u2019s student loan interest deduction, a taxpayer\u2019s MAGI is their AGI without respect to the student loan interest deduction.If the taxpayer\u2019s MAGI is less than $70,000, ($140,000 if they are married filing jointly), then the taxpayer is eligible to deduct all of their student loan interest paid up to the maximum deduction of $2,500.If their MAGI is between $70,000 and $85,000 ($140,000 and $170,000 if they are married filing jointly), then the taxpayer is eligible to take a student loan deduction of less than $2,500.If their MAGI is above $85,000 ($170,000 if they are married filing jointly), then they are not eligible to take the student loan interest deduction.MAGI and Social SecurityFor purposes of calculating how much of one\u2019s Social Security benefits are taxable, MAGI is calculated as AGI plus nontaxable interest plus one-half of their Social Security benefits.If the taxpayer\u2019s MAGI is less than $25,000 ($32,000 if they are married filing jointly), then the taxpayer will likely not need to include any of their Social Security benefits in their income.If their MAGI is between $25,000 and $34,000 ($32,000 and $44,000 if they are married filing jointly), the the taxpayer may have to pay tax on up to 50% of their Social Security benefits.If their MAGI is above $34,000 ($44,000 if they are married filing jointly), then they may have to may tax on up to 85% of their Social Security benefits.Adjusted Gross Income: ConclusionHere\u2019s the bottom line of what you need to know about adjusted gross income:Adjusted gross income is a tax calculation that adds up all of a taxpayer\u2019s income and subtracts certain adjustments allowed by the tax code.Adjusted gross income is calculated on Line 11 of Form 1040.Adjusted gross income or a modification of it may be used to calculate other components of a taxpayer\u2019s tax return.Adjusted gross income is not the same as taxable income."},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Taxes","item":"https:\/\/moneydoneright.com\/taxes\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"Personal Taxes","item":"https:\/\/moneydoneright.com\/taxes\/\/personal-taxes\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"What Is Adjusted Gross Income?","item":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/what-is-adjusted-gross-income\/#breadcrumbitem"}]}]