How is Adjusted Gross Income (AGI) calculated on Form 1040?

1. What AGI actually is — the short, legal definition

The IRS defines AGI as “total (gross) income from all sources” — wages, tips, interest, dividends, capital gains, business and retirement income, etc. — minus certain adjustments to income listed under Internal Revenue Code §62 and on Schedule 1 of Form 1040 ^{[1] [5]}. That difference is the starting point for many credits, deductions and filing thresholds ^[1].

2. Step‑by‑step: how you calculate AGI on Form 1040

Follow the Form 1040 worksheet: (a) add up all taxable income and enter the total on line 9 (total income); (b) add allowable adjustments (the “above‑the‑line” deductions) on Schedule 1 and carry their total to line 10 (total adjustments); (c) subtract line 10 from line 9 — the result is your AGI and you place it on line 11 of Form 1040 ^{[2] [3]}. Multiple independent guides repeat the same mechanics ^{[6] [7]}.

3. What counts as “all taxable income”

The IRS and tax guides list a broad set of income types that feed line 9: wages, tips, taxable interest and dividends, capital gains, business income, rental income, unemployment compensation, and most retirement distributions, among others ^{[1] [5]}. If a particular item’s taxability is uncertain, the IRS instructions and Schedule 1 detail when to include it ^[1].

4. Typical “adjustments” you subtract to get AGI

Adjustments (entered on Schedule 1 and totaled on Form 1040 line 10) include common above‑the‑line deductions such as educator expenses, certain business expenses for reservists/self‑employed, health savings account deductions, self‑employment tax deduction, deductible part of self‑employment tax, self‑employed SEP/SIMPLE/qualified plan contributions, self‑employed health insurance deduction, penalty on early savings withdrawal, IRA deduction, student loan interest deduction (subject to limits), and others detailed on Schedule 1 ^{[1] [7]}. Exact items and amounts depend on the tax year and IRS instructions ^[1].

5. Where AGI sits in the tax flow and why it matters

AGI is calculated before you take either the standard deduction or itemized deductions — it is the baseline used to determine eligibility and phase‑outs for many credits and deductions and is the starting point when computing Modified AGI (MAGI) for programs like premium tax credits and Roth IRA limits ^{[1] [8] [9]}. Tax preparers and software emphasize AGI’s role as an identity‑check value for e‑filing (prior year AGI) ^{[4] [6]}.

6. MAGI vs AGI — why people confuse them

MAGI is not shown directly on the 1040 but is calculated differently depending on the program: you generally start with AGI (line 11) and then add back specific items such as foreign earned income exclusion or tax‑exempt interest for the particular purpose you’re calculating MAGI for ^{[8] [9]}. Different credits and deductions use slightly different MAGI definitions, so the “add‑backs” vary ^[10].

7. Practical notes — software, reporting location, and verification

Most taxpayers let tax software compute AGI automatically; the IRS explicitly notes tax software can calculate it for you ^[1]. For tax years referenced in these guides, AGI is reported on Form 1040 line 11 (also true for 1040‑SR and 1040‑NR) and last year’s line 11 AGI is often requested to verify identity when e‑filing ^{[4] [11] [6]}.

8. Limitations and where to look for definitive answers

This overview reflects IRS guidance and major tax‑prep sources on how AGI is computed and where it appears on Form 1040 ^{[3] [1] [4]}. For precise, year‑specific lists of allowable adjustments, phase‑out thresholds, or statutory text, consult the current IRS instructions for Form 1040 and Schedule 1 or a tax professional; those detailed line items and limits are set in IRS publications and the Internal Revenue Code and are summarized but not exhaustively enumerated in the cited guides ^{[1] [7]}.