Adjusted Gross Income (AGI)

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Definition

Adjusted gross income (AGI) is gross income from taxable sources minus allowable deductions.  

Overview

In the equation above, taxable sources can include wages, interest, capital gains, income from retirement accounts, and alimony received. Allowable deductions can include unreimbursed business expenses, some medical expenses, alimony paid, and deductible retirement plan contributions.

The American Jobs Creation Act of 2004 allows a taxpayer to, while computing AGI, to deduct attorney fees and court costs paid by the taxpayer from the taxpayer's gross income.

The deductions for AGI are all "above the line deductions" meaning that they are taken into account before tax exemptions for military service, dependent status, etc.

AGI is typically the starting point for calculating a tax bill and for determining relevant deductions and credits

Further Reading

For more on adjusted gross income, see this St. John's Law Review article and this Brigham Young Law Review article.