AGI (Adjusted Gross Income).

In plain English

Adjusted Gross Income is total income (wages, self-employment income, interest, dividends, capital gains, retirement distributions, etc.) minus a defined set of adjustments. Traditional IRA contributions, HSA contributions, student loan interest, half of self-employment tax, and a few others. AGI shows up on Line 11 of Form 1040. It's the launching point for the rest of the tax calculation.

01Why it matters

AGI determines your eligibility for many tax breaks. Roth IRA contribution limits phase out at certain AGI levels. Some deductions and credits (like the Premium Tax Credit for marketplace health insurance, or the student loan interest deduction) phase out as AGI rises. AGI also determines what counts as 'income' for things like income-driven student loan repayment plans.

02The math, step by step

Your salary is $90,000. You contribute $7,500 to a Traditional IRA and $2,000 to an HSA via payroll (already excluded from Box 1) plus an additional $1,500 to a personal HSA. Your AGI ≈ $90,000 - $7,500 (IRA) - $1,500 (HSA out-of-paycheck) = $81,000. The standard deduction is then subtracted from AGI to get taxable income.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT