Adjusted gross income (AGI) is a calculation used to determine how much income is taxable on a taxpayer’s tax return. Starting with gross income, which is a sum of all wages, investment income, capital gains, retirement income, among other things, AGI factors in a number of allowable deductions to arrive at the monetary amount a taxpayer will be taxed on.
The allowable deductions that can be factored into gross income to arrive at AGI include, but are not limited to: retirement plan contributions, medical expenses, capital losses, alimony payments, and school tuition and student loan interest.