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

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What does adjusted gross income (AGI) represent?

Total income before deductions

Total gross income minus specific deductions

Adjusted gross income (AGI) is defined as the total gross income of an individual minus specific deductions allowed by the IRS. These deductions can include things like contributions to retirement accounts, student loan interest, and certain moving expenses, among others. AGI is a critical figure on a tax return because it determines eligibility for various tax credits and deductions, which can reduce overall tax liability.

Total income before deductions does not accurately capture the adjustments made for certain expenses that lower taxable income, therefore it doesn't represent AGI. On the other hand, income after all taxes have been paid suggests a net income position which is not relevant in the context of AGI, as AGI is calculated before taxes are applied. Lastly, stating that income is derived solely from investments is too narrow, as AGI includes income from various sources beyond just investments, such as wages and salaries.

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Income after all taxes have been paid

Income derived solely from investments

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