What is Adjusted Gross Income (AGI)?
Adjusted gross income (AGI) is gross income minus adjustments like deductible IRA and HSA contributions. It sets eligibility for many credits and deductions.
Adjusted gross income (AGI) is your total income for the year minus a specific set of deductions the IRS calls adjustments to income. It appears on line 11a of the 2025 Form 1040 and is the number a great many tax rules key off.
AGI is not your taxable income. Taxable income comes later, after you subtract the standard or itemized deduction and a few other deductions taken below the AGI line. AGI sits between the two, and its position matters: lowering AGI can qualify you for benefits that lowering taxable income cannot.
How to Calculate Adjusted Gross Income
AGI = Gross Income - Adjustments to Income
Gross income covers wages, self-employment income, interest, dividends, capital gains, rental income, taxable retirement distributions, and the taxable portion of Social Security.
Adjustments, sometimes called above-the-line deductions, are reported on Schedule 1 and subtracted whether or not you itemize. They include:
- Deductible traditional IRA contributions
- Health Savings Account (HSA) contributions made outside payroll
- Student loan interest, up to $2,500
- One half of self-employment tax
- SEP, SIMPLE, and solo 401(k) contributions for the self-employed
- Educator classroom expenses
- Alimony paid under divorce agreements finalized before 2019
Adjusted Gross Income Example
Say a single filer has the following for 2026:
| Item | Amount |
|---|---|
| Wages (W-2 Box 1, after $8,000 of pre-tax 401(k) deferrals) | $72,000 |
| Interest and dividends | $3,000 |
| Long-term capital gains | $5,000 |
| Gross income | $80,000 |
| Deductible traditional IRA contribution | -$5,000 |
| HSA contribution made outside payroll | -$4,000 |
| AGI | $71,000 |
Taxable income comes next. Subtracting the 2026 standard deduction for a single filer ($16,100) leaves $54,900 of taxable income, assuming no other deductions.
What Doesn’t Reduce AGI
Pre-tax 401(k) and 403(b) contributions are not adjustments. They never appear in your gross income to begin with, since your employer excludes them from Box 1 of your W-2. They lower AGI through that exclusion, which is why you won’t find them on Schedule 1.
The standard or itemized deduction doesn’t touch AGI either. Neither do the deductions added by the One Big Beautiful Bill Act (OBBBA) for qualified tips, qualified overtime pay, car loan interest, and taxpayers 65 and older. Those are claimed on Schedule 1-A and subtracted on line 13b of the 2025 Form 1040, after AGI, so they reduce taxable income but leave AGI and the thresholds tied to it unchanged.
Adjusted Gross Income on Your W-2
Your W-2 has no AGI box, because AGI depends on income and adjustments your employer doesn’t see. Box 1 (wages, tips, other compensation) is the closest starting figure. It already excludes pre-tax 401(k) and 403(b) deferrals, so it’s often lower than your salary. Boxes 3 and 5 (Social Security and Medicare wages) add those deferrals back, so they can be higher than Box 1 and aren’t the right starting point.
To get from Box 1 to AGI, add any other income (interest, dividends, capital gains, side-business profit), then subtract adjustments such as deductible IRA contributions or HSA contributions made outside payroll.
Why AGI Matters More Than Taxable Income
AGI, or a modified version of it, controls eligibility for a long list of tax benefits. Some of these phase out gradually; others are cliffs, and the Medicare income-related monthly adjustment amount (IRMAA) in particular can cost about $1,150 to $1,740 a year per person for crossing most tier thresholds by a dollar.
| What AGI controls | Why it matters |
|---|---|
| Roth IRA eligibility | Contributions phase out over an income range |
| Traditional IRA deductibility | Phases out if you are covered by a workplace plan |
| Affordable Care Act (ACA) premium tax credits | Subsidy size scales with income relative to the federal poverty level |
| Medicare IRMAA surcharges | Part B and D premiums rise at income tiers, based on income from two years prior |
| Medical expense deduction | Only expenses above 7.5% of AGI are deductible |
| Net Investment Income Tax | 3.8% on the lesser of net investment income or the amount your modified adjusted gross income (MAGI) exceeds $200,000 single, $250,000 filing jointly, or $125,000 filing separately |
| Student loan interest deduction | Phases out at higher income |
The medical expense floor shows why the ordering matters: a lower AGI both increases the deduction and can qualify you for credits, while an itemized deduction reduces taxable income without touching any of these thresholds.
AGI vs. MAGI
Modified adjusted gross income (MAGI) is AGI with certain items added back. The catch is that MAGI is not one number. Each provision defines it slightly differently.
For Roth IRA eligibility, MAGI adds back the student loan interest deduction and a few exclusions. For ACA subsidies, it adds back tax-exempt interest, untaxed Social Security, and the foreign earned income exclusion. For IRMAA, it is AGI plus tax-exempt interest.
With straightforward finances, MAGI and AGI are often the same or nearly so. They diverge when you have municipal bond interest, foreign income, or significant untaxed Social Security.
Lowering Your AGI
Adjustments are a fixed statutory list, so the levers are limited.
Contributing to a traditional 401(k) or 403(b) keeps income out of Box 1 entirely. HSA contributions reduce AGI and are the only deduction that also produces tax-free growth and tax-free qualified withdrawals. For the self-employed, a SEP or solo 401(k) can shelter a large share of business income.
Timing matters at the margins. Deferring a bonus, harvesting capital losses to offset gains, or shifting a Roth conversion into a lower-income year all move AGI. With ProjectionLab’s Optimize tool, you can cap Roth conversions below an IRMAA cliff or an ACA income limit.
Retirees in the window between leaving work and claiming Social Security have the most room to work with, since they choose which accounts to draw from and therefore how much taxable income to recognize in any given year.
Frequently Asked Questions
Where do I find my AGI? On line 11a of the 2025 Form 1040 (line 11 on the 2024 form). You will also need last year’s AGI to verify your identity when e-filing.
What is the difference between AGI and taxable income? AGI is gross income minus adjustments. Taxable income is AGI minus your standard or itemized deduction and any other below-the-line deductions, such as the qualified business income deduction or the Schedule 1-A deductions, and it is the figure your tax brackets apply to.
Do 401(k) contributions reduce AGI? Yes, but indirectly. Pre-tax contributions are excluded from the wages reported on your W-2, so they never enter gross income. They are not listed as an adjustment because they were never counted.
Is MAGI the same as AGI? Usually close, rarely identical. MAGI adds back specific items and is defined differently for each provision that uses it. Check the definition for the specific benefit you are evaluating.
How can I lower my AGI? Pre-tax retirement contributions, HSA contributions, self-employed retirement plans, and deductible traditional IRA contributions. Timing income and harvesting capital losses help at the margin.
Does AGI include Social Security benefits? Only the taxable portion, which is zero to 85% of benefits depending on your other income. The untaxed portion stays out of AGI but is added back for some MAGI calculations, including ACA subsidies.
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