Line 37 on Form 1040: What Is Adjusted Gross Income?

When reviewing your annual tax return, Form 1040, you will encounter a figure on Line 11 titled Adjusted Gross Income. This number, often abbreviated as AGI, is a calculation in the process of determining your final tax obligation. It represents a modified version of your total earnings for the year. Understanding how this figure is derived and its subsequent impact on other areas of your tax return is helpful for grasping your overall tax picture.

Defining Adjusted Gross Income

Adjusted Gross Income is a specific measure of income calculated by the Internal Revenue Service (IRS) that begins with your total, or gross, income. Gross income encompasses all the money you earned throughout the year from various sources, including wages from a job, freelance income, and investment returns. From this starting point, certain specific deductions are subtracted to arrive at your AGI.

AGI is the primary base from which your taxable income is determined. It is not the final number you pay taxes on, but it is a foundational step in the process. Unlike gross income, which is simply a tally of all your earnings, AGI reflects your income after accounting for a particular set of expenses and contributions. The AGI figure itself is used as a threshold for qualifying for numerous other tax benefits.

Calculating Your Adjusted Gross Income

The calculation of your Adjusted Gross Income begins with your total gross income and then subtracts a specific category of deductions known as “above-the-line” adjustments. These adjustments are detailed on Schedule 1 of Form 1040. The total of these deductions is then entered on your main Form 1040 and subtracted from your gross income to arrive at the AGI reported on Line 11. You can claim these deductions even if you do not itemize and instead take the standard deduction.

Common above-the-line deductions include:

• Educator expenses: Eligible K-12 teachers, instructors, counselors, principals, or aides can deduct up to $300 for unreimbursed classroom costs. If two eligible educators are married and file a joint return, they can deduct up to $600, though the limit for each individual remains $300.
• Health Savings Account (HSA) contributions: This allows you to subtract the amount you contributed to an HSA during the year, reducing your AGI.
• Deductible part of self-employment taxes: If you are self-employed, you can deduct one-half of what you paid in Social Security and Medicare taxes.
• Traditional IRA contributions: The deductibility of these contributions for the 2025 tax year depends on your income and whether you are covered by a retirement plan at work. For single filers covered by a workplace plan, the deduction phases out with a modified AGI between $79,000 and $89,000. For married couples filing jointly where the contributing spouse is in a workplace plan, the phase-out range is between $126,000 and $146,000.
• Student loan interest deduction: This allows you to subtract the interest you paid on a qualified student loan, up to a maximum of $2,500 per year. For the 2025 tax year, the ability to claim this deduction is gradually reduced for single filers with a modified AGI between $85,000 and $100,000, and for joint filers with a MAGI between $170,000 and $200,000.

The Role of AGI in Your Tax Return

Once calculated, your Adjusted Gross Income becomes a threshold that determines your eligibility for a wide range of tax deductions and credits. Many tax benefits are subject to phase-outs, meaning they are reduced or eliminated entirely as your AGI surpasses certain levels. This makes managing your AGI through above-the-line deductions a strategy for maximizing potential tax savings elsewhere on your return.

A clear example of AGI’s impact is the medical expense deduction. While medical expenses are an itemized deduction claimed on Schedule A, you can only deduct the amount of qualified expenses that exceeds 7.5% of your AGI. A lower AGI reduces this threshold, potentially allowing you to deduct more of your medical costs. For instance, with an AGI of $60,000, you could only deduct medical expenses over $4,500.

AGI also governs eligibility for tax credits. The Child Tax Credit, worth up to $2,000 per qualifying child for the 2025 tax year, begins to phase out for taxpayers with a modified AGI over $400,000 for those married filing jointly and $200,000 for other filers. For every $1,000 of income above these thresholds, the credit is reduced by $50.

Education credits are similarly affected. The American Opportunity Tax Credit, a credit worth up to $2,500 for higher education expenses, begins to phase out if your MAGI is between $80,000 and $90,000 for single filers. The Lifetime Learning Credit, a nonrefundable credit of up to $2,000, uses the same income phase-out ranges. For joint filers, the phase-out range for both credits is between $160,000 and $180,000.