Adjusted Gross Income compared to Modified Adjusted Gross Income

Let's first define what Gross Income is. Gross Income is Gross Earnings, it's the total revenue you received before paying any taxes and expenses. As far as tax returns are concerned it's the total income prior to any deductions or credits. Thus it's line 7-21 on your 1040A.

Adjusted Gross Income

This is what we are taxed on in most cases. Adjusted Gross Income (AGI) is a subtraction of all the deduction that you qualify for, from your Gross Income. On your 1040 this is line 23-35. If you decided to look at a 1040 you will notice that this deduction does not include and itemized or Standard deductions. The reason you won't see this here is because these deductions are available to all taxpayers regardless if you take a standard deductions or if you qualify for itemization.

Modified Adjusted Gross Income

This one is a bit tricker to explain as it could be complicated depending on your level of understanding as far as taxes is concerned. The simplest way to put this it is your AGI modified by either including excluded income or eliminating certain deduction or a combination of both, According to PricewaterhouseCoopers 2008 Guide to Tax and Financial Planning: Including Analysis of the 2007 Tax Law Changes. This Guide was writing 8 years ago, although tax laws change yearly the definition of terms seldmonly ever change. Most people are concerned with Modified Adjusted Gross Income(MAGI) because it determines their eligibility of an IRA Roth.


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