Adjusted Gross Income

Adjusted gross income (AGI) is your income from all taxable sources minus certain adjustments. It is the key to determining your eligibility for certain tax benefits and the phase-out of your eligibility for others. It's the amount from which deductions (the standard deduction or itemized deductions) and the value of personal and dependent exemptions are deducted to arrive at the amount (taxable income) that will be taxed.

The adjustments are sometimes referred to as "above-the-line deductions" because you can claim them whether or not you itemize deductions. The adjustments include deductions for: educator expenses, certain business expenses of reservists, performing artists, and fee basis government officials; IRA deductions; student loan interest; tuition and fees; Health Savings Accounts; moving expenses; one half of self-employment taxes; self-employed health insurance premiums; self-employed contributions to retirement plans; early withdrawal of savings penalties; alimony payments and a few other miscellaneous items.