What does 'AGI' stand for in tax preparation?

AGI stands for Adjusted Gross Income, which is a critical figure in tax preparation as it affects how much of your income is subject to taxation and your eligibility for various deductions and credits. Adjusted Gross Income is calculated by taking your total gross income and then subtracting specific deductions, such as contributions to retirement accounts, student loan interest, and tuition fees. This adjustment allows taxpayers to arrive at a more accurate representation of their income after accounting for these deductions, which can influence their overall tax liability.

Understanding AGI is essential for tax strategizing, as it serves as the basis for determining eligibility for tax benefits that have AGI limits. In contrast, terms like Averaged Gross Income, Annual General Income, or Aggregated Gross Income are not established concepts in tax preparation and do not carry the same significance.