Federal adjusted gross income, or AGI, is your total income for the year minus a specific set of deductions the tax code lets you subtract before anything else. It appears on Line 11 of Form 1040, and it’s the number the IRS uses as the starting point for almost every calculation that follows: which credits you qualify for, how much of your medical bills you can deduct, whether you can contribute to a Roth IRA, and whether you owe surcharges on investment income or Medicare premiums.
How AGI Is Calculated
The math has two steps.
First, add up all your taxable income from every source: wages, salaries, tips, interest, dividends, capital gains, business profits, rental income, retirement distributions, unemployment compensation, and anything else the tax code treats as income.1Internal Revenue Service. Definition of Adjusted Gross Income That total is your gross income.
Second, subtract the deductions the Internal Revenue Code designates as “above-the-line” adjustments. These come off your income before you ever reach the standard deduction or itemized deductions. What’s left is your AGI.2Internal Revenue Service. Adjusted Gross Income
Adjustments That Reduce Your AGI
Above-the-line adjustments are valuable because you can claim them whether you take the standard deduction or itemize. They lower AGI directly, which can unlock other benefits further down the return. The most common ones:
- Half of self-employment tax. Self-employed workers pay both the employer and employee portions of Social Security and Medicare; the employer-equivalent half is deductible.
- Traditional IRA contributions, subject to income limits if you or your spouse are covered by a workplace retirement plan. For 2026, the contribution limit is $7,500, or $8,600 if you’re 50 or older.3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
- Health Savings Account contributions. For 2026, you can deduct up to $4,400 for self-only coverage or $8,750 for family coverage.4Internal Revenue Service. Revenue Procedure 2025-19
- Student loan interest, up to $2,500 a year, phasing out for single filers with MAGI above $85,000 and joint filers above $175,000.
- Self-employed health insurance premiums for yourself and your family, as long as the deduction doesn’t exceed the business’s net profit.
- Unreimbursed classroom expenses for eligible educators.
- Early withdrawal penalties on CDs or similar savings instruments.
New Deductions for 2025 Through 2028
The One Big Beautiful Bill Act created several temporary above-the-line deductions that apply to tax years 2025 through 2028:5Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
- Qualified tips, up to $25,000, for employees and self-employed workers in occupations that customarily receive tips. Phases out above $150,000 MAGI for single filers and $300,000 for joint filers.
- Overtime pay, up to $12,500 ($25,000 for joint filers). Only the premium portion required under the Fair Labor Standards Act qualifies. Same MAGI phase-outs as the tips deduction.
- Car loan interest, up to $10,000, on a loan used to buy a personal vehicle. Phases out at $100,000 MAGI for single filers and $200,000 for joint filers.
- A $6,000 senior deduction for each person age 65 or older. A married couple where both spouses qualify can deduct $12,000 combined. Phases out at $75,000 MAGI for single filers and $150,000 for joint filers.
Because each of these reduces AGI, they can also help you qualify for income-dependent credits and avoid surcharges.
AGI vs. MAGI
Many tax provisions don’t use AGI directly. They use Modified Adjusted Gross Income (MAGI), which starts with AGI and adds back certain excluded or deducted items. The add-backs are different for every provision.6Internal Revenue Service. Modified Adjusted Gross Income
For Roth IRA limits, MAGI equals AGI plus any traditional IRA deduction, student loan interest deduction, and foreign earned income exclusion. For the premium tax credit, MAGI adds back tax-exempt interest and nontaxable Social Security benefits. For most taxpayers without foreign income or tax-exempt bond interest, MAGI and AGI are the same number.
Why Your AGI Matters
Cross certain AGI or MAGI thresholds and you can lose credits worth thousands of dollars or trigger extra taxes you wouldn’t otherwise owe. A few of the biggest places this shows up:
Tax Credits
The Earned Income Tax Credit is fully refundable, meaning it can generate a refund even if you owe no tax, but its AGI limits are hard cutoffs: exceed the threshold for your filing status and number of children and the credit disappears entirely.7Internal Revenue Service. Earned Income and Earned Income Tax Credit (EITC) Tables A modest AGI reduction, through an IRA contribution or HSA deduction, can be worth real money if it keeps you under the line.
The Child Tax Credit is $2,200 per qualifying child for 2026.8Internal Revenue Service. Child Tax Credit You receive the full credit with AGI of $200,000 or less ($400,000 for married couples filing jointly). Above those thresholds, the credit shrinks by $50 for every $1,000 of excess income.
For ACA marketplace coverage, the premium tax credit is tied to household income as a percentage of the federal poverty level. For 2026 coverage, households above 400% of the poverty line are generally ineligible. Below that line, the credit covers the difference between a benchmark plan’s cost and the percentage of income you’re expected to contribute, so a small change in projected income can swing the subsidy by hundreds of dollars a month.
Deduction Floors
If you itemize, you can deduct unreimbursed medical and dental costs only to the extent they exceed 7.5% of your AGI.9Internal Revenue Service. Topic No. 502, Medical and Dental Expenses With an AGI of $100,000, the first $7,500 in medical bills produces zero deduction. A lower AGI shrinks the floor and lets more of your spending count.
The State and Local Tax (SALT) deduction, capped at $10,000 under the 2017 Tax Cuts and Jobs Act, was raised to $40,000 by the One Big Beautiful Bill Act for taxpayers with MAGI under $500,000 ($250,000 for married filing separately). The cap phases down for higher incomes until it returns to $10,000. Both the cap and the income threshold adjust upward by 1% each year through 2029. SALT and other itemized deductions are claimed on Schedule A of Form 1040.10Internal Revenue Service. About Schedule A (Form 1040), Itemized Deductions
Roth IRA Eligibility
Your MAGI determines whether you can contribute to a Roth IRA. For 2026, single filers get a full contribution below $153,000 MAGI, a reduced contribution between $153,000 and $168,000, and nothing at $168,000 or above. Joint filers get a full contribution below $242,000, phased out between $242,000 and $252,000.3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 The 2026 contribution limit is $7,500, with an additional $1,100 catch-up for those 50 and older.
Net Investment Income Tax
High earners face an additional 3.8% tax on net investment income (interest, dividends, capital gains, rental income, and certain other passive income). The tax applies to the lesser of your net investment income or the amount by which your MAGI exceeds $200,000 for single filers, $250,000 for joint filers, or $125,000 for married filing separately.11Internal Revenue Service. Topic No. 559, Net Investment Income Tax These thresholds are not indexed for inflation, so more taxpayers cross them each year.
Medicare Premium Surcharges
Medicare uses your MAGI from two years ago to set Part B and Part D premiums. If your 2024 MAGI exceeds certain thresholds, you’ll pay Income-Related Monthly Adjustment Amount (IRMAA) surcharges on top of standard premiums in 2026. IRMAA works as a cliff: going $1 over a bracket triggers the full surcharge for the entire year. At the highest bracket, combined annual surcharges top $6,900 per person. The year you retire or sell a major asset deserves extra planning, because a one-time income spike can raise your Medicare premiums two years later. You can request an IRMAA reconsideration if you’ve had a life-changing event like retirement or job loss.
From AGI to Taxable Income
AGI is not the number you pay tax on. To get taxable income, you subtract either the standard deduction or your total itemized deductions, whichever is larger.
Most filers take the standard deduction. For 2026, the amounts are $16,100 for single or married filing separately, $32,200 for married filing jointly, and $24,150 for head of household.12Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Taxpayers 65 or older or blind receive additional standard deduction amounts on top of these figures. The $6,000 senior deduction from the One Big Beautiful Bill Act is separate: it reduces AGI rather than adding to the standard deduction, so qualifying seniors benefit from both.
If your deductible expenses exceed the standard deduction, itemizing saves more. Common itemized expenses include the SALT deduction, home mortgage interest, and charitable contributions, all claimed on Schedule A. Subtracting whichever deduction method you use from AGI gives you your taxable income, the figure the federal tax brackets actually apply to.
Where to Find Your AGI
Your AGI appears on Line 11 of Form 1040.2Internal Revenue Service. Adjusted Gross Income Tax software calculates it automatically as you enter income and adjustments.
You may need last year’s AGI when e-filing, because the IRS uses it to verify your identity before accepting an electronic return.1Internal Revenue Service. Definition of Adjusted Gross Income If you don’t have the prior return handy, log into your IRS Online Account and check the Records and Status tab for that tax year. You can also request a free tax return transcript if you can’t access the online account.