What Is Adjusted Gross Income?
Adjusted Gross Income is simply your total gross income minus specific deductions. Additionally, your Adjusted Gross Income is the starting point for calculating your taxes and determining your eligibility for certain tax credits and deductions that you can use to help you lower your overall tax bill.
What Is AGI?
Adjusted Gross Income, or AGI, starts with your gross income, and is then reduced by certain “above the line” deductions. Some common examples of deductions that reduce adjusted gross income include 401(k) contributions, health savings account contributions and educator expenses.
“So, What Is Adjusted Gross Income on Your W-2?”
The answer is – it’s not. However, we’ve heard this question before as taxpayers ask for help with their taxes. Let’s face it, tax terminology can get a little confusing. When it comes to talking about income, there are several terms that sound similar, but they have their own definitions and purposes. Understanding a bit more about these terms can help us better understand what Adjusted Gross Income is and what it isn’t.
- Gross Income – This includes all income received from all sources, and could include money, property, and the value of services received. Gross income is reduced by adjustments and deductions before taxes are calculated. Wages, tips, interest, dividends, rents and pension income are examples of sources that contribute to your gross income.
- Taxable Income – This is your AGI minus either the standard deduction or total of itemized deductions—whichever is greater and the qualified business income deduction if applicable. Your taxable income is what you’ll use to determine your tax bracket. Note, with changes from the Tax Cut and Jobs Act, personal and dependent exemptions, which may have lowered your taxable income, were eliminated from 2018 through 2025.
- Modified Adjusted Gross Income (MAGI) – This is your AGI plus a few adjustments added back in. Your Modified Adjusted Gross Income determines your eligibility for certain deductions, credits and retirement plans. Take note: there’s no fixed definition of MAGI as the adjustments vary, depending on the specific tax benefit.
Finding your prior-year adjusted gross income on your 1040
Your prior-year AGI can be used to validate your electronic return with the IRS. To locate your Adjusted Gross Income on Form 1040 from the previous year, you’ll need a copy of last year’s return. For 2019, you can find the amount listed on the following lines based on the form you used.
- If you filed Form 1040, your AGI will be listed on Line 8b.
- If you filed Form 1040-NR, your AGI will be listed on Line 35.
Need to know more about adjusted gross income?
Still have questions about Adjusted Gross Income? Our Tax Pros can help. They’re dedicated to knowing the nuances of taxes and can help you understand your return.
Make an Appointment to speak with a tax pro today.
Not sure if your child’s unearned income qualifies for the kiddie tax? Let H&R Block help you determine if the kiddie tax rules apply to your child’s income.
Learn more about the sales expenses associated with the sale of stock and how to report it on the tax form 1099-b from the tax experts at H&R Block.
Learn more about the qualification rules for tax-exempt military pay with the experts at H&R Block. Find out if you qualify for tax benefits.
Have you recently earned Bitcoin income from rising stock value? Explore the rules surrounding cryptocurrency-sourced capital gains and losses with H&R Block.