Over 700 finance terms, Shmooped to perfection.
AGI matters for a whole host of reasons - but the most popular time the cavalry of AGI is called in is for home mortgage debt limits. Most banks have maximum multiples of AGI under which they will loan money so it's an important number.
Basically AGI is your normal salary and bonus bucks plus passive income like net rents you get from that small apartment building you now own (thank you dead uncle Harry) and dividends on stuff like GE stock AND capital gains from mutual fund distributions. The way AGI gets defined by the IRS - God's financial quarterback - is that it is whatever you pay taxes on.