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Your adjusted gross income, or AGI, is used to determine whether you qualify for certain tax deductions and credits.
For instance, in order to qualify to get a stimulus check from the US government’s coronavirus relief bill, you need to have an AGI of less than $99,000 or $198,000 if you file taxes jointly.
To find AGI, take your gross income and subtract above-the-line deductions, like contributions to retirement accounts and student loan interest.
See Business Insider’s picks for the best tax software »

If you’re a taxpaying American, chances are you’ve come across the term “adjusted gross income.”

Your adjusted gross income, or AGI, is how the IRS determines whether you qualify for certain tax deductions and credits. It’s also the income cutoff that the United States government will use to send stimulus checks to Americans as part of its massive coronavirus relief package, should it become law.

The stimulus checks are one-time direct payments being sent to low and middle-income Americans. The exact amount each person will receive is based on the AGI reported on their latest tax return; the maximum payment is $1,200 for individuals, plus an additional $500 per child for parents. For most people, the relevant AGI can be found on either this year’s tax return or their 2018 return.

It’s important to understand that AGI is different than gross income. Gross income is the amount of money you receive in any given year, including wages, tips, capital gains, business income, and retirement distributions.

Once you know your gross income, you can find your AGI by subtracting above-the-line deductions, otherwise known as “adjustments to income.” These deductions include the following:

Student-loan interest
Contributions to a qualified retirement plan or traditional IRA

Health-savings account contributions
The employer portion of self-employment taxes
Health insurance premiums for self-employed people
The penalty on early savings withdrawals
Alimony paid on a divorce settled prior to 2019

Moving expenses for active military members

If the current coronavirus relief bill is signed into law, up to $300 of cash donations to a nonprofit charity will also count as an above-the-line deduction beginning with tax year 2020.

Each year when you complete your tax return, you’ll calculate your AGI. Then you will either claim the greater of the standard deduction or your total itemized deductions, such as charitable donations and property taxes. The resulting amount is your taxable income.

You may also see the term …read more

Source:: Business Insider

      

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