Adjusted Gross Income (AGI) is the key word

While preparing your tax return, you probably spend more time on your "taxable income" without paying any attention whatsoever on your adjusted gross income (AGI). However, your Adjusted Gross Income (AGI) directly impacts the deductions and credits you’re eligible for—which can wind up reducing the amount of taxable income you report on the return.

Adjusted gross income (AGI) is an individual's total gross income minus specific deductions. Taxable income is adjusted gross income minus allowances for personal exemptions and itemized deductions. For most individual tax purposes, AGI is more relevant than gross income.

Your AGI is equal to the total income you report that’s subject to income tax such as earnings from your job, self-employment, alimony income and interest from a bank account minus specific deductions, or “adjustments” that you’re eligible to take. Your AGI is calculated before you take exemptions and the standard or itemized deduction—which you report in later sections of the return.

You can find AGI in the forms 1040, 1040A, 1040EZ or 1040NR.

Click here for more information on AGI and click here to learn more about the AGI implications on taxes.