What is the final step in calculating Adjusted Gross Income (AGI)?

The final step in calculating Adjusted Gross Income (AGI) involves subtracting total adjustments from total income. This process is crucial because AGI reflects an individual's income after accounting for specific deductions that reduce their taxable income.

Initially, all sources of income are added together to determine the total income. Then, adjustments, which may include contributions to retirement accounts, student loan interest deductions, and certain other expenses, are calculated. By subtracting these adjustments from the total income, you arrive at the AGI figure, which serves as a foundation for determining further deductions and the overall tax liability.

The other choices focus on different aspects of the tax calculation process. Subtracting the standard deduction or exemption amount takes place after the AGI is established, as these deductions further lower the taxable income but are not part of the AGI calculation itself. Adding all income items is an earlier step in the process, before any adjustments are made. Therefore, option A accurately describes the concluding step for arriving at AGI.