What does the term AGI stand for?

The term AGI stands for Adjusted Gross Income, which is a fundamental concept in income tax preparation and calculation. Adjusted Gross Income represents an individual's total gross income after adjustments are made for specific deductions allowed by the Internal Revenue Service (IRS). These adjustments can include contributions to retirement accounts, student loan interest, tuition and fees, and health savings account contributions, among others.

AGI is crucial because it serves as the starting point for determining an individual's taxable income. Many tax credits and deductions are contingent upon the taxpayer's AGI level, making it a key figure in the overall tax liability calculation. For instance, certain deductions phase out at higher AGI levels, and many tax benefits are designed to be available only to those below specific AGI thresholds. Therefore, understanding AGI and its components is essential for tax planning and compliance.