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Many U.S. households are expecting coronavirus-related financial assistance from the federal government, after the president signed a massive spending package on Friday.
One of the key provisions of the spending program is direct cash payments that will be made to eligible taxpayers, based on their adjusted gross income.
Payments are expected to be $1,200 per adult for those with adjusted gross income up to $75,000. The threshold for married couples is $150,000, who are entitled to $2,400 and $500 per child.
The phase-out rate is $5 for every $100 above this threshold.
The benefit disappears entirely for those earning more than $99,000, or $146,500 for heads of households with one child and $198,000 for joint filers without children.
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But what is Adjusted Gross Income, or AGI?
According to the IRS, AGI is defined as gross income minus adjustments to income – or certain payments that may be excluded.
Gross income refers to your salary, business income, tips, retirement income, capital gains, and other forms of income.
Adjustments to this income include items such as student loan interest, educator expenses, child support payments, early savings withdrawal penalties, health savings account contributions, and contributions. to a retirement account, among others.
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This means that your AGI will always be equal to or less than your gross income, which will generally be good news for people wondering where they are on the spectrum of stimulus checks.
Your AGI is found on your Form 1040, where the IRS will look to determine if you owe money under the new proposal — and how much. If you filed your 2019 returns, the IRS will rely on those documents first. If you haven’t filed this year yet, the agency will verify your 2018 return. If you haven’t filed either and you were supposed to, the IRS urges you to do so. as soon as possible in order to receive your payment.
On Friday, Treasury Secretary Steven Mnuchin said the first direct deposit payments would hit taxpayer accounts in three weeks, on April 17. It is believed that those without a direct deposit account may have to wait a bit longer.
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