Adjusted Gross Income (AGI)
Definition
Your total gross income minus specific deductions (called "adjustments to income"). AGI is a key figure on your tax return because it determines eligibility for many deductions and credits. It includes wages, salaries, interest, dividends, business income, capital gains, and retirement distributions, minus adjustments like student loan interest, IRA contributions, and self-employment tax.
Example
If you earn $75,000 in salary and contribute $6,000 to a traditional IRA, your AGI would be $69,000. This lower AGI might qualify you for additional tax credits.