What is adjusted gross income? How to find your AGI
- Your Adjusted Gross Income, or AGI, is used to determine whether you qualify for certain deductions and tax credits.
- To qualify for the third stimulus check, you will need an AGI of $ 80,000 or less, or $ 160,000 if you are filing taxes jointly.
- To find your AGI, take your gross income and subtract any adjustments above the line, like pension contributions and student loan interest.
- This article has been revised for accuracy and clarity by Lisa Niser, an expert on Personal Finance Insider’s tax review committee.
If you are a US taxpayer, chances are you’ve come across the term “adjusted gross income”.
Your Adjusted Gross Income, or AGI, is your taxable income before deducting your standard or itemized deductions, and is often used by the IRS to determine whether you are entitled to certain deductions and tax credits. This is also the income threshold that the United States government used to determine eligibility for coronavirus stimulus checks.
The first and second stimulus checks were one-time direct cash payments sent to low- and middle-income Americans. A third stimulus check is currently being considered as part of the US bailout.
As of March 2020, the maximum payment for individuals was $ 1,200 and $ 500 for each child under 17. The maximum amount of the second check was $ 600 per adult taxpayer and $ 600 for each child under 17. The maximum amount of the third stimulus check is currently set at $ 1,400 per adult taxpayer, plus $ 1,400 per dependent.
The US bailout is currently with the House of Representatives, which may make changes to the bill, and will require House approval before going to President Biden for a signature.
Single taxpayers whose 2019 or 2020 AGI was $ 75,000 or less should receive the full stimulus payment. Those earning between $ 75,001 and $ 80,000 will receive a reduced amount. Married spousal filers earning up to $ 150,000 would be eligible for full payment, and those earning between $ 150,001 and $ 160,000 would be eligible for reduced payment.
What is AGI and how do I calculate it?
It is important to understand that AGI is different from gross income. Gross income is the amount of money you receive in any given year, including salaries, tips, capital gains, business income, and retirement distributions.
Once you know your gross income, you can find your AGI by subtracting the deductions above the line, also known as “income adjustments”. These deductions include the following:
- Student loan interest
- Contributions to a Qualified Pension Plan or Traditional IRA
- Contributions to the health savings account
- The employer’s share of the self-employment tax
- Health insurance premiums for the self-employed
- The penalty on early savings withdrawals
- Alimony paid in the event of a divorce settled before 2019
- Moving expenses for active military personnel
Under the CARES Act, up to $ 300 of cash donations to a nonprofit charity will also be considered a top deduction from the 2020 tax year. This amount is per return, and not by taxpayer.
If you see the term “modified adjusted gross income” or MAGI, this is your AGI with some deductions added and is used to determine eligibility for additional tax breaks, such as the tuition and fee deduction.