Intuit Academy Tax Practice Exam 2025 - Free Tax Practice Questions and Study Guide

Adjusted gross income (AGI) is defined as gross income minus specific deductions, which makes the chosen answer accurate. To arrive at AGI, individuals start with their total gross income, which includes wages, dividends, capital gains, business income, and retirement distributions. From this figure, specific deductions, also known as "above-the-line" deductions, are subtracted. These deductions can encompass contributions to retirement accounts, student loan interest, and certain educational expenses, among others.

Understanding this concept is crucial for taxpayers, as AGI is not only a key figure on tax returns but also serves as a basis for determining eligibility for various tax credits and deductions. It affects phase-out limits for these benefits and plays a significant role in calculating overall tax liability.

The other options do not accurately capture the definition of adjusted gross income. For instance, simply stating gross income plus specific deductions misrepresents the calculation process, as AGI is derived from subtracting these deductions rather than adding them. Similarly, describing total gross income without any deductions fails to account for the adjustments made to determine AGI. Lastly, mentioning taxable income after all exemptions encompasses a broader scope that extends beyond the definition of AGI; taxable income is calculated after AGI has been further adjusted for