What Is Adjusted Gross Income (AGI), and How Do You Calculate It?

Adjusted gross income (AGI) is extremely important for filing your annual income taxes. More specifically, it appears on your Form 1040 and helps determine which deductions and credits you are eligible for. Your AGI helps determine how much you’ll owe in income taxes. For tax year 2025 (filed in 2026), you can find your AGI on page 1, line 11 of the IRS Form 1040.

As you take care of your taxes, make sure you have an adequate financial plan in place, which a financial advisor can help you with.

Understanding Adjusted Gross Income (AGI)

Adjusted gross income (AGI) is a variation of your gross income that accounts for certain deductions that usually make it lower than your gross income. By contrast, gross income is the total amount of money you earn in a year before income taxes or other deductions are taken out. Because of this distinction, AGI is typically the foundation for calculating how much you’ll owe in taxes.

Your AGI heavily affects what deductions and credits you’re eligible for in a tax year. For example, if you have a low AGI, you’ll likely be able to claim more in deductions and credits than someone with a higher AGI.

How to Calculate Your AGI

To determine your adjusted gross income, start with your gross income. This includes wages or salary from a job, bank account interest, stock dividends and rental property income. If you reported self-employment business income on Schedule C, you would include that in your gross income as well. Bonuses, tips, alimony and even gambling winnings are also part of gross income. You generally do not include life insurance payments, child support, loan proceeds, inheritances or gifts in your AGI, though.

From your gross income, you then subtract specific amounts by making “adjustments” called “above the line” deductions. This is available to taxpayers, even if they are taking the standard deduction.

One example of a payment you may be able to subtract from your gross income is a contribution to a qualified retirement account, such as an IRA. Other permissible subtractions may include interest on student loans, alimony payments, contributions to health savings accounts (HSAs) and certain kinds of moving expenses. In turn, AGI is the result of taking all of these adjustments from your gross income.

Online tax preparation services and software programs both calculate AGI for you, and automatically enter it into the correct line. Regardless of these convenient features, make sure you enter these amounts correctly when transferring the information from the forms your employer gives you to Form 1040.

How Your Adjusted Gross Income Affects Your Taxes

Your adjusted gross income affects the extent to which you can use deductions and credits to reduce your taxable income. For instance, consider the effect of AGI on medical and dental expenses for taxpayers who itemize.

Those who itemize can deduct only the amount of qualified medical and dental expenses that are higher than a certain percentage of their adjusted gross income. For tax year 2025, which you file in 2026, this limit is once again 7.5% of your AGI. This means that if your medical and dental expenses don’t exceed 7.5% of your AGI, you likely won’t be able to deduct them at all.

AGI-related limits also apply to deductions for tuition and charitable contributions. You can generally deduct qualified charitable contributions of cash that you made until the deduction amount reaches 60% of your AGI for tax years 2025 and 2026. Therefore, your AGI has a significant effect on which deductions and credits you can take, as well as how much they’re worth.

Your adjusted gross income is especially important if you live in a state that collects state income taxes. Many states use the AGI from your federal return as the starting point for state income tax calculations.

Use our calculator to understand how tax brackets apply to your earnings.

Income Tax Calculator

Calculate your federal, state and local taxes for the 2025 tax year.

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About This Calculator

Our income tax calculator calculates your federal, state and local taxes based on several key inputs: your household income, location, filing status and number of personal exemptions.

How Income Taxes Are Calculated

First, we calculate your adjusted gross income (AGI) by taking your total household income and reducing it by certain items such as contributions to your 401(k).
Next, from AGI we subtract exemptions and deductions (either itemized or standard) to get your taxable income. Exemptions can be claimed for each taxpayer.
Based on your filing status, your taxable income is then applied to the tax brackets to calculate your federal income taxes owed for the year.
Your location will determine whether you owe local and / or state taxes.

When Do We Update? - We check for any updates to the latest tax rates and regulations annually.

Customer Service - If you would like to leave any feedback, feel free to email info@smartasset.com.

Assumptions

Deductions

"Other Pre-Tax Deductions" are not used to calculate state taxable income.

Credits

The only federal credit automatically calculated is the Savers Credit, depending on your eligibility.
We do not apply any refundable credits, like the Child Tax Credit or Earned Income Tax Credit (EITC).
We do not apply state credits in our calculations.

Itemized Deductions

If itemizing at the federal level, you may need to itemize at the state level too. Some states don't allow itemized deductions, which is accounted for in our calculations.
When calculating the SALT deduction for itemized deductions, we use state and local taxes, and we assume your MAGI.
We assume that there is no cap to itemized deductions, if a state allows them.
We do not categorize itemized deductions (such as medical expenses or mortgage interest), which could be subject to specific caps per state.

Local Tax

Depending on the state, we calculate local taxes at the city level or county level. We do not include local taxes on school districts, metro areas or combine county and city taxes.
With the exception of NYC, Yonkers, and Portland/Multnomah County, we assume local taxes are a flat tax on either state taxable income or gross income.

Actual results may vary based on individual circumstances and changes in tax laws or IRS regulations. Estimates provided by this calculator do not guarantee income tax amounts or rates. Past performance is not indicative of future results.

SmartAsset.com does not provide legal, tax, accounting or financial advice (except for referring users to third-party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). Articles, opinions and tools are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. Users should consult their accountant, tax advisor or legal professional to address their particular situation.

AGI vs. MAGI vs. Taxable Income

Your AGI is not the income figure on which the IRS will tax you. Your final income number, or “taxable income,” comes from subtracting even more deductions from your AGI.

For the 2025 and 2026 tax years, the vast majority of taxpayers will likely use the standard deduction rather than itemized deductions. Under current laws, the standard deduction for the 2025 tax year (filed in 2026) is $15,750 for single filers, $31,500 for married couples filing jointly and $23,625 for heads of household. For tax year 2026 (what you file in early 2027) the standard deduction rises to $16,100 for single filers, $32,200 for joint filers and $24,150 for heads of household.

Modified adjusted gross income (MAGI) is another term related to taxable income and adjusted gross income. MAGI comes into play when you’re trying to figure out whether you qualify for certain deductions. For instance, if your MAGI is above certain income limits and you have a workplace retirement plan, you may not be able to take the full deduction for contributing to an IRA.

To calculate your MAGI, you have to add certain deductions, such as student loan interest, back to your adjusted gross income. If you didn’t claim any of these deductions, your AGI and MAGI should be the same.

Bottom Line

SmartAsset: What Is Adjusted Gross Income (AGI), and How Do You Calculate It?

Calculating your AGI is a crucial step towards finding out how much of your income is taxable. It can be relatively simple if you have a good idea of what parts of your income constitute the figure. With changing tax laws and forms, however, some of these situations can get tricky. It’s smart to work with an accountant or use a reliable tax software program to help you out.

Financial Planning Tips

If your tax situation is complex or you want advice on investing and financial planning, try speaking with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
One of the best ways to take care of your money is to set a monthly budget for you and your family. Stop by SmartAsset’s free budget calculator to begin building a plan for yourself.