A worked example
Gross income of $85,000 with $8,000 of adjustments gives an AGI of $77,000.
AGI is not taxable income
The standard or itemised deduction comes off AGI afterwards, and taxable income is what remains after that.
Why AGI matters so much
Eligibility for a long list of credits and deductions phases out against AGI, so a small change can cost more than the amount itself.
What counts as an adjustment
Deductible retirement contributions, health savings account contributions, the deductible part of self-employment tax and student loan interest are the common ones.
Adjustments beat deductions
They reduce AGI itself, so they help even if you take the standard deduction, and they improve every AGI-linked threshold at the same time.
Modified AGI is a different figure
Several rules add certain items back to reach a modified AGI, and each rule modifies it differently.
Gross income is broader than salary
Interest, dividends, capital gains, rental profit and business income all belong in the starting figure.
Filing status changes the thresholds
The same AGI can sit inside a phase-out for one status and outside it for another, which is why joint versus separate is worth modelling.
Last year's AGI is used for identity checks
Electronic filing often asks for the prior year figure, so it is worth keeping the return where you can find it.
What moves the result
Raise gross income by 10%, from $85,000 to $93,500, and the result moves from $77,000 to $85,500, a change of +11.0%. It marks the input worth verifying first.
This is an estimate, not tax advice
The adjustments available change, and several have their own limits. The IRS instructions govern. Many filers treat this figure as taxable income, when the standard or itemised deduction still comes off it afterwards. Eligibility for a long list of credits and deductions phases out against this number, so a small movement can cost more than the amount itself. Deductible retirement contributions, health savings account contributions, part of the self-employment tax and student loan interest are the usual adjustments. Adjustments reduce the figure itself, so they help even when the standard deduction is claimed, and they improve every linked threshold at once. Several rules add specific items back to reach a modified version of the figure, and each rule modifies it in its own way. Interest, dividends, capital gains, rental profit and business income all belong in the starting gross figure. The same result can sit inside a phase-out under one filing status and outside it under another, which makes the comparison worth modelling. Electronic filing often asks for the prior year figure as an identity check, so last year's return is worth keeping accessible. Building the gross figure from every income source rather than the salary alone is what makes the rest of the return line up. Contributing to a deductible retirement account late in the year is one of the few levers that still moves this figure after December. The available adjustments change from year to year and several carry their own limits, so the current instructions govern.