How to calculate your adjusted gross income
While lawmakers have yet to agree on the details of another coronavirus relief program, new $ 1,400 stimulus checks are expected to be included. For many Americans, eligibility for these relief payments can come down to one number you hardly ever think about: your adjusted gross income.
Whether or not you receive a payment depends on your Adjusted Gross Income, or AGI, not necessarily your total income. The latest relief program includes payments of $ 1,400 for people with adjusted gross income up to $ 75,000. Married couples earning up to $ 150,000 will receive $ 2,800.
The AGI is the number the government uses to determine how much of your income is taxable, before applying standard or itemized deductions. It takes the money you’ve earned from work, investments, and other sources and subtracts certain expenses, including interest on student loan payments and contributions to qualified retirement accounts, according to the IRS.
When filing your taxes, your AGI can be found on line 11 of Form 1040 2020 and line 8b of Tax Form 2019. But if you want to calculate it yourself before filing your taxes, the process is relatively straightforward. .
First of all, you need to calculate your gross income. This number includes your salary, dividends, rental income, and any other income you received during the year. However, some things are excluded, including gifts, inheritance and child support.
Once you have that number, it’s time to subtract your deductions above the line. Form 1040 will contain a list of acceptable deductions, but the most common include classroom expenses if you are a K-12 teacher, eligible tuition fees, interest paid on student loans, and contributions to a student. IRA 401 (k) or traditional.
Take a teacher whose gross income is $ 80,000 per year. If he spent $ 200 on school supplies in 2020, contributed $ 5,000 to his IRA, and paid $ 300 in student loan interest, he could subtract $ 5,500 from his gross income. This would leave him with an AGI of $ 74,500, which would make him eligible for stimulus payments.
There are a large number of AGI calculators available for free online that can do the math for you if you provide them with the required information, including the one from the TaxAct blog.
The fact that your eligibility for the stimulus is determined by your AGI means that a salary above the proposed threshold of $ 75,000 will not automatically prevent you from receiving a payment, as long as you file your taxes on time. If you have enough deductions to bring your AGI below the requirement threshold, you will still receive a check for $ 1,400.
Because Congress doesn’t expect to pass stimulus legislation until at least next month, that leaves Americans at least a few weeks to file their 2020 taxes. Doing this in a timely manner is especially important for those who earned less. in 2020 than in 2019, because if the government does not have a new tax return to file, it will determine your stimulus payment using your 2019 number.
Eligible Americans will also receive an additional payment of $ 1,400 for each dependent. The previous two rounds of stimulus have limited dependents’ eligibility to children under the age of 17, but the next round is expected to include adult dependents such as students, adults with disabilities, and older Americans. This means that a family of four could receive up to $ 5,600 from the government.
To verify: How donations to charities can affect your taxes in 2020
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