Your eligibility for a $1,400 stimulus check is based off your adjusted gross income—here's how to calculate it
While lawmakers have not yet agreed on the details of another coronavirus relief package, fresh $1,400 stimulus checks are expected to be included. For many Americans, eligibility for those relief payments may come down to a figure 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 package includes $1,400 payments for individuals with an adjusted gross income up to $75,000. Married couples earning up to $150,000 will receive $2,800.
AGI is the number that the government uses to figure out how much of your income is taxable, before you apply the standard or itemized deductions. It takes the money that 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 the 2020 Form 1040 and on line 8b of the 2019 tax form. But if you want to calculate it yourself before filing your taxes, the process is relatively simple.
First, you need to calculate your gross income. That number includes your salary, dividends, rental income and any other income you had come in during the year. Certain things are excluded, however, including gifts, inheritance and child support.
Once you have that figure, it's time to subtract your above-the-line deductions. Form 1040 will have a list of acceptable deductions, but common ones include classroom expenses if you're a K-12 teacher, qualified tuition payments, interest paid on student loans and contributions to a 401(k) or traditional IRA.
Take a teacher whose gross income is $80,000 per year. If he spent $200 on classroom supplies in 2020, contributed $5,000 to his IRA and paid $300 in student loan interest, he would be able to subtract $5,500 from his gross income. That would leave him with an AGI of $74,500, making him eligible for the stimulus payments.
There are a slew of AGI calculators available for free online that can do the math for you if you feed them the requisite information, including this one from the TaxAct Blog.
Having your stimulus eligibility determined by your AGI means having a salary above the proposed $75,000 cutoff won't automatically disqualify you from receiving a payment, provided you file your taxes on time. If you have enough deductions to bring your AGI below the requirement threshold, you'll still receive a $1,400 check.
Because Congress doesn't expect to pass stimulus legislation until at least next month, that leaves at least a few weeks for Americans to file their 2020 taxes. Doing this in a timely manner is especially important for those who earned less in 2020 than they did in 2019, because if the government does not have a new tax return to go off of, it will determine your stimulus payment using your 2019 number.
Eligible Americans will also receive an additional $1,400 payment for each dependent. The previous two rounds of stimulus limited dependent eligibility to children under 17, but the next round is expected to include adult dependents such as college students, disabled adults and older Americans. This means that a family of four could receive up $5,600 from the government.
Check out: How donating to charities can affect your 2020 taxes
Don't miss: The best credit cards for building credit of 2021
Source: Read Full Article