Adjusted gross income (AGI) is more than just a line on the tax return. AGI is the figure used as a limitation or threshold for many tax breaks and opportunities. AGI is gross income reduced by deductions other than itemized deductions and personal exemptions (Code Sec. 62). Deductions taken into account in figuring AGI are commonly referred to as “above-the-line deductions.”
In an increasing number of situations modified adjusted gross income (MAGI) is used as a limitation or threshold. MAGI is AGI to which certain other tax items are added back or subtracted. In most cases, MAGI is simply AGI increased by the foreign earned income exclusion, which effectively is AGI for those with no foreign earned income.
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