How to Reduce Your AGI in 2026
What reduces adjusted gross income, the 2026 limits for each adjustment and how much federal tax a lower AGI saves you. Enter your numbers in the calculator to see your own savings.
How to Reduce Your AGI in 2026
AGI is your total income minus a short list of adjustments the IRS lets you take whether or not you itemize. Because it is the starting point for most other tax calculations, lowering AGI lowers your income tax and can also help you qualify for credits and deductions that phase out at higher incomes. The calculator beside this text shows how much a set of adjustments saves you.
AGI Formula 2026
Source: IRS Topic 501 · IRS 2026 retirement limits (IR-2025-111)
Ways to Lower Adjusted Gross Income: 2026 Limits
| Adjustment | 2026 limit | Notes |
|---|---|---|
| Traditional 401(k) or 403(b) | $24,500; $32,500 at age 50+; $35,750 at ages 60 to 63 | Pre-tax contributions are left out of your taxable wages, which lowers AGI. Roth contributions do not. |
| Traditional IRA | $7,500; $8,600 at age 50+ | Deductible in full if neither spouse has a workplace plan. With a plan, the deduction phases out at $81,000 to $91,000 (single) or $129,000 to $149,000 (married filing jointly). |
| Health savings account (HSA) | $4,400 self-only; $8,750 family; plus $1,000 at age 55+ | Requires a qualifying high-deductible health plan. |
| Student loan interest | $2,500 | Phases out at $85,000 to $100,000 (single) or $175,000 to $205,000 (joint) of modified AGI. |
| Educator expenses | $350 | For eligible K-12 teachers and staff. |
| Self-employed health insurance | Premiums paid, up to net self-employment profit | For people with self-employment income who are not eligible for an employer plan. |
| Half of self-employment tax | 50% of the SE tax | Calculated automatically on Schedule SE. |
Contribution limits come from IRS news release IR-2025-111, HSA and student loan figures from IRS Revenue Procedures 2025-19 and 2025-32.
Example: How Much Tax Does Lowering AGI Save?
$85,000 income, single filer, 2026
The saving is $14,400 times the 22% bracket the whole amount came out of. This shows income tax only. Payroll 401(k) deferrals are still subject to Social Security and Medicare tax, while HSA contributions made through an employer plan also avoid payroll tax, a further saving not counted here.
What Does Not Reduce AGI
The standard deduction and itemized deductions, including mortgage interest, state and local taxes and charitable gifts, come after AGI, so they lower taxable income but not AGI. The new deductions for tips, overtime, seniors and car loan interest also come after AGI. Roth 401(k) and Roth IRA contributions do not reduce AGI either, because they are made with after-tax money. To compare the standard and itemized deduction, use the tax deductions calculator.
Why a Lower AGI Matters
Lower AGI means lower taxable income, but it also helps you stay under the income limits that phase out the student loan interest deduction and the traditional IRA deduction, and it lowers the dollar amount of medical expenses you must clear (7.5% of AGI) before they count as an itemized deduction. For the full definition and where to find AGI on Form 1040, read what adjusted gross income is.
How to Reduce AGI: Frequently Asked Questions
What reduces AGI?
Pre-tax 401(k) contributions, HSA contributions, deductible traditional IRA contributions, student loan interest, the educator expense deduction, self-employed health insurance and half of self-employment tax all reduce AGI. The standard deduction and itemized deductions do not.
How to reduce AGI?
Increase pre-tax contributions to a 401(k), HSA or deductible IRA before the tax year ends. In 2026 the limits are $24,500 for a 401(k), $4,400 for self-only HSA coverage and $7,500 for an IRA.
How can I reduce AGI if I am an employee?
Raise your traditional 401(k) deferral, enroll in an HSA-eligible health plan and fund the HSA, and contribute to a traditional IRA if you qualify for the deduction.
How to lower AGI?
Any adjustment to income lowers AGI. The largest levers for most workers are a pre-tax 401(k) up to $24,500 and an HSA up to $4,400 (self-only) or $8,750 (family) in 2026.
How to lower adjusted gross income?
Contribute to pre-tax accounts, deduct student loan interest up to $2,500 if your income qualifies, and use the educator expense deduction if you teach. Each dollar of adjustment lowers AGI by a dollar.
What are the ways to reduce adjusted gross income?
The main ways are a traditional 401(k) or 403(b), an HSA, a deductible traditional IRA, student loan interest, educator expenses, self-employed health insurance and the deduction for half of self-employment tax.
Does a 401(k) reduce AGI?
A traditional 401(k) does, because the contribution is left out of your taxable wages. A Roth 401(k) does not.
Does an HSA reduce AGI?
Yes. HSA contributions are an adjustment to income, or are excluded from your wages when made through payroll, so they lower AGI. The 2026 limit is $4,400 for self-only coverage and $8,750 for family coverage.
Do charitable donations reduce AGI?
No. Charitable donations are an itemized deduction taken after AGI, so they reduce taxable income but not AGI.
Does the standard deduction reduce AGI?
No. The standard deduction is subtracted from AGI to get taxable income, so AGI is the same whether you take the standard deduction or itemize.
Does a traditional IRA reduce AGI?
Yes, if the contribution is deductible. In 2026 you can contribute up to $7,500 ($8,600 at age 50 or older), and the deduction phases out between $81,000 and $91,000 of income for a single filer covered by a workplace plan.
How much tax does lowering my AGI save?
It saves your marginal tax rate times the amount of the adjustment. For example, $14,400 of adjustments in the 22% bracket saves $3,168.
What is the difference between AGI and taxable income?
AGI is your income minus adjustments. Taxable income is AGI minus your standard or itemized deduction.
Does standard deduction reduce AGI?
No. The standard deduction is subtracted after AGI, so it lowers taxable income but not AGI.
Do 401k contributions reduce AGI?
Traditional 401k contributions do, because they are left out of your taxable wages. Roth 401k contributions do not.
Does 401k reduce AGI?
A traditional 401k reduces AGI by the amount you contribute, up to $24,500 in 2026 ($32,500 at age 50 or older). A Roth 401k does not.