How To Figure Out Adjusted Gross Income From W-2 | AGI Math

Start with W-2 box 1 wages, then add any other taxable income and subtract eligible adjustments to land on AGI on Form 1040.

Your W-2 is a solid starting point for your tax return, but it is not your adjusted gross income. AGI is the number used across the return to set limits and eligibility, and it shows on line 11 of Form 1040. The good news: if you know which W-2 boxes matter, you can build AGI in a few calm steps.

This walkthrough shows a practical way to go from the W-2 in your hand to the AGI line on your return. It also shows when a W-2 alone is not enough, and what extra documents you’ll need so your math matches the IRS forms.

What Adjusted Gross Income Means On A Tax Return

Adjusted gross income is your total taxable income from all sources, minus certain income adjustments allowed before itemized deductions or the standard deduction. The IRS keeps a plain definition, plus where to find it on the form: Adjusted gross income (AGI). When you understand what goes into AGI, you stop treating it like a mystery number that only tax software can produce.

If you only worked one W-2 job all year and had no other income and no adjustments, your AGI can match your W-2 box 1. Many people have at least one twist: bank interest, dividends, unemployment, a deductible IRA deposit, HSA deposits made outside payroll, or student loan interest. Those items move the AGI line up or down.

Start With The W-2 Boxes That Set Your Baseline

The number most people need first is W-2 box 1, “Wages, tips, other compensation.” It already reflects many pre-tax payroll items, like 401(k) deferrals and certain health plan payroll deductions. That’s why box 1 is often lower than box 3 (Social Security wages) and box 5 (Medicare wages).

If you have more than one W-2, add all box 1 amounts together. If you are married and filing jointly, include your spouse’s W-2 box 1 totals too. This sum is the wage piece that flows to Form 1040 line 1.

If you want the IRS’s official overview of what a W-2 is, where revisions live, and where employers find related instructions, use: About Form W-2, Wage and Tax Statement.

How To Figure Out Adjusted Gross Income From W-2 With A Simple Worksheet

Think of AGI as a running total that ends on Form 1040 line 11. You can build it on paper, in a notes app, or in a spreadsheet. Use this order so you don’t lose track.

Step 1: Write Down Your Total W-2 Box 1 Wages

Line one of your worksheet is the sum of box 1 from every W-2 you received. Call it “Total W-2 wages.” This is the wage income you report on the main return.

Step 2: Add Other Taxable Income That Does Not Show Up On A W-2

A W-2 only reports employee pay from an employer. It will not report bank interest, stock dividends, capital gain distributions, unemployment compensation, taxable refunds of state taxes, gig work reported on 1099 forms, rental income, or taxable retirement distributions. Each of those items can raise AGI.

If you want a reliable map for where “other income” lands, open the official Schedule 1 PDF. It lists common add-ons and shows how totals flow back into Form 1040: Schedule 1 (Form 1040) Additional Income And Adjustments.

Step 3: Subtract Adjustments You Qualify For

Adjustments are deductions taken before you reach AGI. A few are tied to work status (like half of self-employment tax), while others apply to many W-2 employees (like the educator expense deduction or an IRA deduction if you qualify). These items lower AGI, which can change eligibility for certain credits.

Some adjustments are already baked into box 1 because your employer processed them through payroll. Others are not, so you must track them yourself. A common case is an HSA deposit you made directly to the HSA bank outside payroll. Those deposits may be deductible even if you take the standard deduction. The IRS lays out HSA eligibility and deductions in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.

Step 4: Check That Your Total Matches The Form Flow

Your worksheet should mirror the forms:

• W-2 wages land on Form 1040 line 1.
• Other income often lands on Schedule 1, then flows to Form 1040.
• Adjustments land on Schedule 1, then reduce the total before line 11.

If you are using software, this manual pass still helps. It catches missing forms, data entry slips, and cases where you typed a number from the wrong W-2 box.

W-2 Details That Commonly Change What You Think You Earned

People get tripped up when they compare box 1 to their final pay stub or to box 5. That gap is often normal. Box 1 is your federal income tax wage base after certain pre-tax payroll reductions. Box 5 can be higher because some payroll deductions reduce federal taxable wages but do not reduce Medicare wages.

The table below is a fast way to spot what a box usually means for AGI work. Use it as a checklist while you gather your other tax forms.

W-2 Box Or Code	What It Usually Represents	AGI Impact
Box 1	Federal taxable wages after many pre-tax payroll items	Direct input to wages on Form 1040
Box 3	Social Security wage base	Not used to compute AGI, but helps spot pre-tax differences
Box 5	Medicare wage base	Not used to compute AGI, but can flag items that did not reduce Medicare wages
Box 10	Dependent care benefits	May affect taxable wages or require Form 2441; can change AGI
Box 11	Nonqualified plan distributions	May be taxable; review whether it is already in box 1
Box 12 Code D	401(k) elective deferrals	Already excluded from box 1, so your AGI starts lower
Box 12 Code E/F/G	403(b), 408(k)(6) SEP, 457(b) deferrals	Often excluded from box 1; still matters for plan limits and credits
Box 12 Code W	Employer HSA contributions	Excluded from box 1; your own non-payroll HSA deposits may be another deduction
Box 13 “Retirement plan” checked	Participation in an employer retirement plan	Can limit IRA deduction eligibility, which can affect AGI

How To Handle The “Other Income” Side Of AGI

If your goal is “AGI from W-2,” treat the W-2 as only the wage module. Then build the rest with the forms that report each income type. Here are common add-ons that raise AGI:

• Interest and dividends. Look for 1099-INT and 1099-DIV from banks and brokerages.
• Capital gains. Look for a 1099-B or a brokerage year-end gain summary.
• Unemployment compensation. Reported on Form 1099-G.
• Side work. Often reported on 1099-NEC or 1099-K, plus your own records for expenses.
• Retirement distributions. Reported on 1099-R.

Each item has its own rules for what part is taxable. Bank interest is usually simple. Stock sales can get messy if cost basis is missing. If you are not sure whether a distribution is taxable, don’t guess. Pull the full statement from the payer and match it to the line the form calls for.

Adjustments That Lower AGI For Many W-2 Filers

Adjustments are where people often miss deductions. Some are only for self-employment, but several are common for employees too. The adjustments section of Schedule 1 is your map.

Educator expenses

If you are an eligible teacher or school staff member, certain classroom costs may reduce income even if you do not itemize. Track receipts and verify eligibility before you enter the amount on Schedule 1.

Health Savings Account deductions

If you made HSA deposits outside payroll, those deposits may be deductible on Schedule 1 if you were eligible for an HSA. Employer HSA deposits reported on the W-2 are already excluded from box 1, so you generally do not deduct them again. Keep a clean record of what came from payroll and what you deposited yourself.

Traditional IRA deductions

Some taxpayers can deduct deposits to a traditional IRA, which can lower AGI. Eligibility can depend on filing status, income, and whether you or a spouse were in a workplace plan (often shown by the W-2 box 13 retirement plan check). Confirm the contribution year on your IRA statement so you don’t claim the wrong year.

Student loan interest

If you paid interest on qualified student loans, up to the allowed amount may be an adjustment, subject to income limits. Your loan servicer sends a Form 1098-E with the year’s interest paid.

Common Mistakes When Trying To Back Into AGI From A W-2

Most AGI errors come from mixing up W-2 boxes, missing a form, or double counting a payroll item. Run this list before you file.

Using box 5 or box 3 instead of box 1

Box 5 is not your federal taxable wage base. If you use it, you can overstate income. Box 1 is the usual wage amount for Form 1040.

Forgetting a second W-2

People change jobs, work seasonal shifts, or get a late W-2 from a side employer. Missing one W-2 can throw off withholding and income at the same time.

Deducting payroll deferrals twice

If you see a 401(k) deferral in box 12 code D, you might be tempted to subtract it again. Don’t. It is already excluded from box 1, which is the wage figure you start with.

Mixing pre-tax HSA payroll deposits with after-tax deposits

Employer HSA contributions listed on the W-2 are already excluded from box 1. Your own deposits made outside payroll can be a separate deduction. Keep those amounts separate so your deduction matches what you truly paid with after-tax dollars.

Ignoring small income forms

A small interest form still counts. Missing small forms can trigger a mismatch notice later if the IRS received a copy from the payer.

A Practical Worksheet You Can Reuse Each Year

This table is a compact worksheet you can reuse. It is not a tax form, but it mirrors the flow that lands on line 11. Fill it in as you receive documents. Stop when each row is backed by a form or a statement you can point to.

Worksheet Line	What To Enter	Where It Comes From
Total W-2 wages	Sum of W-2 box 1 amounts	All Forms W-2
Other income	Interest, dividends, unemployment, taxable refunds, business income, gains	1099 forms, statements, Schedule 1 lines
Total income	W-2 wages plus other income	Form 1040 income section
Adjustments	Eligible deductions that sit on Schedule 1 Part II	1098-E, IRA statements, HSA records, Schedule 1
Adjusted gross income	Total income minus adjustments	Form 1040 line 11

How To Sanity-Check Your Number Before You Hit File

Once you’ve built AGI, do two quick checks.

Check 1: Does the wage line match your W-2 stack?

Your wages on Form 1040 should match the sum of all W-2 box 1 figures you entered. If it does not, find the missing W-2 or the data entry slip.

Check 2: Do the adjustments have paperwork?

Every adjustment needs a basis: a form, a statement, or a log. Keep a simple folder with PDFs and screenshots. If you get asked later, you can show how each number was built.

If you file as married filing jointly, rerun the same checks for your spouse’s documents. It is common for one person to have an IRA deduction or a student loan interest form that the other person never sees.

When A W-2 Cannot Get You All The Way To AGI

A W-2 can only get you to wage income. If you had investment sales, a small business, rental property, partnership income, or deductions tied to self-employment, your return can include extra schedules beyond Schedule 1. In those cases, treat this article as the wage portion of your worksheet, then add the other schedules and totals the same way: income first, then adjustments.

Once you can rebuild AGI confidently, a lot of other choices get easier: whether to contribute to an IRA before the deadline, whether an HSA deposit is worth making, and what withholding changes might fit your next year.