What is adjusted gross income?

What is adjusted gross income? How to find your AGI Adjusted gross income (AGI) is your total earnings minus certain deductions. Maskot/Getty Images

• Your adjusted gross income, or AGI, is used to determine whether you qualify for certain tax deductions and credits.
• For instance, in order to get a first-round stimulus check, you had to have an AGI of less than $99,000, or $198,000 if you file taxes jointly.
• To find your AGI, take your gross income and subtract above-the-line deductions, like contributions to retirement accounts and student loan interest.
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If you're a taxpaying American, chances are you've come across the term "adjusted gross income."

Your adjusted gross income, or AGI, is how the IRS determines whether you qualify for certain tax deductions and credits. It's also the income cutoff that the United States government used to send stimulus checks to Americans back in March, and will use again to determine who gets a second-round stimulus check.

Both the first and second stimulus checks are one-time direct cash payments sent to low- and middle-income Americans. The exact amount each person will receive is based on the AGI reported on their latest tax return.

In March, the maximum payment for individuals was $1,200. The maximum amount of the next check will be $600. Previously, dependent children received a $500 payment. In this next round, they'll each receive $600. For most people, the relevant AGI can be found on either this year's tax return or their 2018 return.

To qualify for a stimulus payment, individuals must have an AGI of less than $75,000 to receive the full amount. Those earning between $75,000 and $99,000 receive a smaller amount. Married joint filers earning up to $150,000 are eligible for a full payment, and those earning between $150,000 and $198,000 qualify for a smaller payment.

What is AGI, and how do I calculate it?

It's important to understand that AGI is different than gross income. Gross income is the amount of money you receive in any given year, including wages, tips, capital gains, business income, and retirement distributions. 

Once you know your gross income, you can find your AGI by subtracting above-the-line deductions, otherwise known as "adjustments to income." These deductions include the following: 

• Student-loan interest
• Contributions to a qualified retirement plan or traditional IRA
• Health-savings account contributions
• The employer portion of self-employment taxes
• Health insurance premiums for self-employed people
• The penalty on early savings withdrawals
• Alimony paid on a divorce settled prior to 2019
• Moving expenses for active military members

Under the CARES Act, up to $300 of cash donations to a nonprofit charity will also count as an above-the-line deduction beginning with tax year 2020.

Each year when you complete your tax return, you'll calculate your AGI. Then you will claim the greater of either the standard deduction or your total itemized deductions, such as charitable donations and property taxes. The resulting amount is your taxable income.

You may also see the term "modified adjusted gross income," or MAGI. This is your AGI with certain deductions added back in and is used for determining eligibility for additional tax breaks, like the tuition and fees deduction.