AGI vs. total income vs. taxable income
Here’s how total income, AGI, and taxable income relate to each other.
| Term | What it includes |
|---|---|
| Total income | All the taxable income you receive during the year |
| Adjusted gross income (AGI) | Gross income minus specific above-the-line adjustments, such as IRA contributions, student loan interest, or educator expenses |
| Taxable income | AGI minus your standard deduction or itemized deductions (and any qualified business income deduction) |
Source: Internal Revenue Service
Note: Total income excludes any forms of income that are tax-exempt.
How to calculate your AGI
You can calculate your AGI in three steps:
- Add up your income from all sources, including wages, interest, dividends, business or self-employment income, retirement income, and capital gains. Don’t include income from tax-exempt sources.
- Total your above-the-line adjustments from Schedule 1 (Form 1040), Part II.
- Subtract your total adjustments from your total income.
For example:
- $58,000 in wages + $3,000 in freelance income + $600 in interest = $61,600 gross income
- $2,000 to traditional IRA + $1,200 paid in student loan interest = $3,200 in above-the-line deductions
- $61,600 - $3,200 = $58,400 AGI
Where to find your AGI
For your current-year return, your AGI appears on Form 1040, Line 11 once you’ve finished the calculation above. If you need last year’s AGI, you can find your prior-year AGI:
- On a copy of last year’s return
- In your IRS Online Account
- Through a tax return transcript
AGI vs. MAGI
Your modified adjusted gross income (MAGI) takes your AGI and adds back certain items that were excluded or deducted, like:
- Untaxed foreign income
- Tax-exempt interest
- Excluded Social Security benefits
You may need your MAGI when determining whether you qualify for certain tax deductions and credits, like IRA contribution deductions or education credits.
| Term | Formula | Where it appears |
|---|---|---|
| AGI | Gross income minus above-the-line adjustments from 1040 Schedule 1 Part II | Form 1040, Line 11 |
| MAGI | AGI plus certain items added back | Not printed on your return; calculated only when a specific rule requires it |
Source: Internal Revenue Service
Why AGI matters
Your AGI shows up throughout your return because the IRS uses it to determine what deductions and credits you qualify to receive.
- Credit and deduction eligibility: Many tax breaks phase out as your AGI rises.
- Taxation of Social Security benefits: The IRS uses a formula based partly on your AGI to determine how much of your Social Security income, if any, is taxable.
- State income tax: Many states start their own tax calculation with your federal AGI, then apply their own additions and subtractions.
How to lower your AGI
You can potentially lower your AGI by claiming these common above-the-line deductions found on Form 1040 Schedule 1:
- Traditional IRA contributions
- HSA contributions
- Student loan interest deduction
- Educator expenses (for eligible teachers)
- Self-employed retirement plan contributions and health insurance premiums
