General tax and payroll information. Confirm specifics with a CPA or EA. Data verified April 2026.
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Gross Income vs AGI: Where Line 11 on Your 1040 Comes From

Gross income and AGI (Adjusted Gross Income) are often confused. They appear at different points on your 1040, they differ by the amount of your above-the-line adjustments, and almost every tax benefit phase-out uses one or the other - but not always the same one.

The Form 1040 Cascade

Gross Income

All income from all sources: W-2, 1099, K-1, interest, dividends, cap gains, rental, retirement

Line 1

minus: Above-the-Line Adjustments

IRA, HSA, student loan interest, half SE tax, educator expenses - see full list below

Schedule 1

Adjusted Gross Income (AGI)

The key number used by most phase-out calculations

Line 11

minus: Standard or Itemised Deduction

~$15,000 single / $30,000 MFJ for 2026; itemise only if exceeds standard

Line 12

minus: QBI Deduction (if applicable)

Section 199A: up to 20% of qualified business income for pass-through owners

Line 13

Taxable Income

The number brackets are applied to

Line 15

Total Tax

Your actual federal income tax liability for the year

Line 24

Above-the-Line Adjustments: The Full 2026 List

Adjustment2026 LimitNotes
Educator expenses$300K-12 classroom teachers; $600 MFJ each educator
HSA deduction$4,300 single / $8,550 familyFor self-only HSA contributions not via Sec 125 payroll
Self-employed retirement (SEP, SIMPLE, Solo 401k)Up to 25% / $69,000Solo 401k: employee + employer up to $69,000
Half of self-employment taxCalculated on Schedule SEReduces AGI by exactly half of SE tax paid
Self-employed health insurancePremiums paidCannot exceed net SE income; not available if employer plan available
Traditional IRA deduction$7,000 / $8,000 age 50+Phase-out if covered by employer plan: $77k-$87k single (2026 est.)
Student loan interest$2,500 maxPhase-out: $75k-$90k single (2026 est.)
Penalty on early CD withdrawalAmount forfeitedWhen bank charges early withdrawal penalty on savings certificate
Alimony paidAmounts per decreeOnly for divorce agreements executed before Jan 1, 2019
Moving expenses (military only)Actual costsPost-TCJA 2017, available only for active-duty military

Source: IRS Publication 17 (2026). Limits are inflation-adjusted annually. Verify via IRS.gov before filing.

Why AGI Matters: Every Phase-Out That Uses It

Roth IRA Contribution Eligibility

Phase-out $150k-$165k single (2026 est.)

Uses MAGI, not plain AGI

Child Tax Credit

Phase-out above $200k single / $400k MFJ

Uses MAGI

Student Loan Interest Deduction

Phase-out $75k-$90k single

Uses MAGI

Medical Expense Itemised Deduction

Floor = 7.5% of AGI

Uses AGI directly

Charitable Deduction (cash gifts)

Limited to 60% of AGI generally

Uses AGI

IRMAA (Medicare premium surcharge)

Starts at $106,000 MAGI single (2026 est.)

Based on 2-year-prior MAGI

Worked Example: W-2 + Side Hustle

W-2 Box 1 Wages$100,000
Schedule C Net Income (side gig)+$5,000
Total Gross Income$105,000
Adjustments:
HSA contribution-$2,000
Traditional IRA-$3,000
Student loan interest-$1,000
Half of SE tax (on $5k x 0.9235 x 15.3% / 2)-$353
Total Adjustments-$6,353
AGI (Form 1040 Line 11)$98,647

Gross vs AGI FAQs

Is AGI before or after taxes?
AGI (Adjusted Gross Income) is a pre-tax figure that appears on Form 1040 Line 11. It is used to calculate your taxable income, which then determines your income tax. AGI is not your net income (take-home pay) - it is a tax concept, not a cash concept. After AGI, you subtract the standard or itemised deduction to reach taxable income, then calculate tax.
How do I lower my AGI?
AGI is reduced by above-the-line adjustments: maximise traditional IRA contributions (up to $7,000 in 2026; $8,000 if age 50+), contribute to an HSA (up to $4,300 single / $8,550 family in 2026), take the student loan interest deduction (up to $2,500), or increase self-employed retirement plan contributions (SEP-IRA up to 25% of net earnings, max $69,000). Each dollar of AGI reduction can cascade through multiple phase-out calculations.
What is the difference between AGI and MAGI?
MAGI (Modified AGI) is AGI with certain deductions added back, and the definition varies by which tax benefit you are calculating. For Roth IRA eligibility, MAGI adds back student loan interest, tuition deductions, and foreign income exclusions. For the American Opportunity Tax Credit, it adds back foreign income. For the passive activity loss rules, it is essentially the same as AGI. The IRS defines MAGI separately for each provision, which is why tax software asks which benefit you are calculating.
Does the standard deduction reduce AGI?
No. The standard deduction (approximately $15,000 single / $30,000 MFJ for 2026) reduces taxable income, not AGI. The sequence is: Gross Income minus above-the-line adjustments equals AGI (Line 11). AGI minus standard or itemised deduction equals taxable income (Line 15). These are two separate steps on Form 1040.