Definition

• Adjusted gross income is the total amount of income you've taken in for the year after a few key adjustments are accounted for first. It gives you an accurate picture of the amount of money you brought in during the year and forms the basis of your income tax calculations. The AGI is calculated and recorded on your Form 1040 when you file your taxes. After determining your AGI, you can then proceed to deduct personal exemptions and deductions to make a final tax calculation.
  
  

Income Items

• When determining AGI, you have a number of income items to consider. Possible income to record includes wages from a job, income from a business, royalties, unemployment compensation and Social Security payments. Other items includes interest income, alimony and dividend payments. Record these items in the "Income" section of Form 1040.
  
  

Adjustments

• The adjustments allowed when determining your AGI include items like moving expenses, educator expenses and student loan interest. Certain health-related contributions and IRA deductions as well as part of your self-employment taxes also count as adjustments. Record these adjustments in the "Adjusted Gross Income" section of Form 1040. If you do not have any adjustments to account for, the AGI is equal to the total in the "Income" section.
  
  

Considerations

• There are a few common scenarios where you will need to know your adjusted gross income for a given year offhand. One example is if you apply for student financial aid --- the forms commonly request your AGI for a given year. Another scenario is when you have to electronically sign your current year's return. One piece of information you may need in order to do so is your AGI from the previous year.