The eligibility of Americans for the $1,400 bailout will depend on your adjusted gross income (AGI).
The U.S. Congress has not yet agreed on the details of another round of CCPV (Wuhan pneumonia) bailout package. However, it is expected that it will include a $1,400 bailout. For many Americans, eligibility for this payment will depend on a number they may not have thought about: Adjusted Gross Income (AGI).
Adjusted Gross Income (AGI) is a very important concept in the U.S. tax system. Almost all of the thresholds for the Deduction and Tax credit are based on AGI, which is not necessarily your gross income.
The latest round of relief includes a $1,400 payment for individuals with AGI up to $75,000; married couples with AGI up to $150,000 will receive $2,800.
AGI is that number that the government uses to figure out how much of your income is taxable before you take the standard deduction or itemized deductions. According to the Internal Revenue Service (IRS), it is that amount left after you subtract certain expenses, including student loan interest and contributions to qualified retirement accounts, from your income from work, investments and other sources.
When filing your taxes, you can find your AGI on line 11 of your 2020 Form 1040 and line 8b of your 2019 tax return. however, according to CNBC experts, you can also calculate it yourself before filing your taxes, and the process is relatively simple.
First, you need to calculate your gross income. This figure includes your salary, dividends, rental income and all other income you had during the year. However, some amounts are excluded, including gifts, inheritances and child support.
Once you have this figure, you can subtract deductions above your limit. 1040 forms will have a list of acceptable deductions. Common items include classroom expenses (for K-12 teachers), qualified tuition, interest on student loans, and contributions to a 401(k) or traditional IRA.
An IRA is a U.S. government investment-assisted Individual Retirement Account (IRA). Traditional IRAs provide a full or partial income tax deferral on amounts deposited, and are not taxable if deposits are not withdrawn.
Take, for example, a teacher whose gross income is $80,000 per year. If he spends $200 on classroom supplies in 2020, contributing $5,000 to his IRA, in addition to $300 in student loan interest payments, then he can subtract $5,500 from his gross income. His AGI would be $74,500, and he would be eligible for the relief money.
In other words, the AGI determines whether you are eligible for the relief. This means that if you file your taxes on Time, you can still receive the money even if your salary is above the threshold of $75,000.
To find out how to calculate AGI, try a free calculator online.
Doing this in a timely manner is especially important for those who earn less in 2020 than they did in 2019. That’s because if the government doesn’t have a new year’s tax return to use as a reference, it will use your 2019-related numbers to determine the bailout.
Congress is not expected to pass a new round of economic bailout bills until at least next month , so you have at least a few weeks to file your 2020 taxes.
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