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AGI Defined

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Hands fanning out money
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Definition: Adjusted Gross Income (AGI) is gross income minus tax deductions that are allowable whether or not you itemize deductions on your tax return. Tax software figures out your AGI for you, and here's how it's calculated:

Taxable income includes salaries or other employment income, interest and dividends, and long- and short-term capital gains and losses, and other sources of income.

The adjustments include certain IRA deductions, moving expenses, and unreimbursed business expenses. Here is a full list of Above-the-Line Deductions used in calculating AGI.

Adjusted Gross Income is figured on the first page of the U.S. federal tax return, and serves as the basis for the income tax you owe. If you're doing your own taxes, use tax software to automatically calculate AGI and to accurately do other tax calculations as the software walks you through the tax interview.

Examples:
After moving to a new state to teach fifth grade last year, I deducted moving expenses along with the cost of supplies I bought for the classroom from my total income. Using these deductions lowered my AGI, which resulted in a tax refund.

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