What Is Adjusted Gross Income (AGI)? 2026 Guide
AGI is the foundation of your tax return — it determines your eligibility for dozens of deductions and credits. Here's how it works and how to reduce it.
Defining Adjusted Gross Income
Adjusted gross income (AGI) is your total gross income for the year minus certain "above-the-line" deductions. It appears on Line 11 of Form 1040 and is the critical intermediate figure on your tax return — used to determine your eligibility for dozens of deductions and credits.
AGI = Gross Income − Above-the-Line Deductions
From AGI, you then subtract either the standard deduction or your itemized deductions to arrive at your taxable income — the number that goes into the tax brackets to calculate your federal income tax.
What Counts as Gross Income?
Gross income includes virtually all income you receive during the year, from any source, unless specifically excluded by law:
- Wages and salaries (reported on W-2)
- Self-employment and freelance income
- Business income (Schedule C)
- Interest and dividends (1099-INT, 1099-DIV)
- Capital gains (1099-B, Schedule D)
- Rental income (Schedule E)
- Alimony received (divorce agreements before 2019)
- Pension and retirement distributions (1099-R)
- Taxable Social Security benefits
- Gambling winnings
- Unemployment compensation
- Prizes and awards
Above-the-Line Deductions That Reduce AGI
These deductions are subtracted before you calculate AGI, so they're available to all taxpayers — you don't need to itemize to claim them. They appear on Schedule 1 of Form 1040:
| Deduction | 2026 Limit |
|---|---|
| Student loan interest | Up to $2,500 |
| Educator expenses (K-12 teachers) | Up to $300 |
| HSA contributions | $4,300 (self-only) / $8,550 (family) |
| Traditional IRA contributions | Up to $7,000 ($8,000 if 50+); income limits if covered by workplace plan |
| Self-employed health insurance premiums | 100% of premiums paid |
| Half of self-employment (SE) tax | 50% of SE tax paid |
| SEP-IRA / SIMPLE IRA / Solo 401(k) contributions | Up to 25% of compensation (SEP); $16,500 (SIMPLE); $23,500 (Solo 401k employee) |
| Alimony paid (pre-2019 agreements only) | Amount paid per divorce agreement |
| Early withdrawal penalty on savings | Penalty amount charged by bank |
Why AGI Matters
Your AGI is the gatekeeper for dozens of tax benefits. A lower AGI typically means more tax breaks. Here's how AGI affects your return:
- Medical expense deduction: Only expenses exceeding 7.5% of AGI are deductible
- Charitable contribution limits: Cash donations capped at 60% of AGI
- Traditional IRA deductibility: Phases out based on AGI if covered by a workplace plan
- Roth IRA eligibility: Uses MAGI (modified AGI), which is close to AGI for most people
- Child Tax Credit and Earned Income Credit: Phase-outs based on MAGI
- Education credits: American Opportunity Credit and Lifetime Learning Credit phase out based on MAGI
- ACA marketplace premium tax credits: Based on MAGI relative to the federal poverty line
- Student loan interest deduction: Phases out at higher AGI levels
Modified AGI (MAGI)
MAGI is AGI with certain deductions added back. Each tax benefit uses a slightly different MAGI calculation — there is no single universal MAGI. Common additions back include:
- Student loan interest deduction
- IRA deduction
- Exclusion for foreign earned income
- Rental losses for passive activity rules
For most middle-income taxpayers, MAGI is very close to or equal to AGI. Check the specific rules for each credit or deduction to confirm which MAGI definition applies.
Where to Find Your AGI
Your current year AGI is on Line 11 of Form 1040. Your prior year AGI — needed to verify your identity when e-filing — can be found on:
- Line 11 of last year's Form 1040
- Your IRS online account at IRS.gov
- An IRS tax transcript (available free at IRS.gov/individuals/get-transcript)
Key Takeaways
- AGI = Gross Income − Above-the-Line Deductions
- AGI appears on Line 11 of Form 1040
- Above-the-line deductions are available regardless of whether you itemize
- Lowering your AGI can unlock additional deductions and credits
- MAGI (Modified AGI) is used for specific phase-out calculations and is usually very close to AGI
- Key AGI reducers: IRA contributions, HSA contributions, self-employed health insurance, and SE tax deduction
Frequently Asked Questions
What is the difference between gross income and AGI?
Gross income is your total income from all sources before any deductions. Adjusted gross income (AGI) is your gross income minus above-the-line deductions such as student loan interest, IRA contributions, and self-employment tax. AGI is the starting point for calculating your taxable income — you then subtract either the standard deduction or itemized deductions from AGI to arrive at taxable income.
What deductions reduce AGI?
Above-the-line deductions that reduce your AGI include: student loan interest (up to $2,500), educator expenses (up to $300), HSA contributions, traditional IRA contributions, self-employed health insurance premiums, half of self-employment tax, contributions to SEP-IRA or solo 401(k), and alimony paid under pre-2019 agreements. These deductions are valuable because you can claim them regardless of whether you itemize.
Where is AGI on my tax return?
Your adjusted gross income (AGI) is on Line 11 of Form 1040. If you need your prior year AGI — for example, to verify your identity when e-filing — you can find it on Line 11 of last year's Form 1040, or request a tax transcript from the IRS at IRS.gov/individuals/get-transcript.