Question: What is adjusted gross income?
Answer: Your adjusted gross income (AGI) is your gross income reduced by deductions other than itemized deductions, the standard deduction, and personal exemptions. Examples of deductions used to arrive at your AGI include business expenses, IRA contributions, student loan interest expense, alimony paid, and job-related moving expenses.
Your AGI determines whether you are eligible for more than two dozen tax benefits, such as tax credits and certain deductions. As your AGI increases, the maximum amount you can claim for certain deductions and credits decreases. For example, your IRA contribution will not be deductible if you are covered under your employer’s pension plan and your adjusted gross income exceeds certain limits.
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