Adjusted Gross Income Definition

Your adjusted gross income is calculated during federal income tax filing and it is the amount of taxable income less certain deductions. The amount of federal income tax you pay is based on your AGI, so it is of course in your best interests to utilize available legitimate deductions.

Also, when applying for a mortgage or commercial loan or line of credit, you will often be required to provide proof of your adjusted gross income for two or more previous years in the form of your tax returns and other documents if you are self-employed. Credit cards and smaller personal loans, however, typically do not require this level of income verification.