Adjusted Gross Income (AGI) is a tax term that is used in the United States to describe an individual's income after accounting for certain tax deductions. It is a key factor in determining how much of an individual’s income is taxable and is used to calculate income tax liabilities. Calculating AGI begins with total gross income which includes wages, dividends, capital gains, business income, and retirement distributions, but then certain deductions (known as adjustments) are subtracted from the total income. These adjustments can include contributions to retirement accounts, student loan interest, tuition, and fees, among others. The result of this calculation directly impacts tax rates, eligibility for tax deductions and credits, and other financial aspects of an individual’s tax return.