Adjusted Gross Income (AGI) is the total income that an individual reports on their tax return after subtracting certain deductions, also known as adjustments.
AGI is a modification of gross income as specified by the US tax code. The IRS utilizes your adjusted gross income amount to calculate your annual income tax liability.
Taxpayer can subtract certain deductions, including contributions to retirement accounts, student loan interest payments, and certain types of business expenses. Below are examples of deductions.
Total of annual earnings, which may include wages, dividends, capital gains, interest income, royalties, rental income, and retirement payouts is known as gross income.
AGI is used to determine eligibility for certain tax benefits, such as the Earned Income Tax Credit, to calculate the taxpayer's tax liability & calculating certain itemized deductions.
Individuals who are required to file an income tax return with the Internal Revenue Service (IRS) in the United States need to calculate their Adjusted Gross Income (AGI).