CORONAVIRUS STIMULUS CHECKS

What is Adjusted Gross Income?

The Senate has voted in favour of a resolution that will allow Democrats to pass a new round of stimulus checks, but who is eligible for the direct payments?

What is Adjusted Gross Income?

On Friday morning the Senate voted in favour of a budget resolution which will pave the way for the Democrats to pass President Joe Biden’s economic stimulus bill. The final package has not yet been passed but, provided that all Democratic Senators vote with the Party, it should be signed into law in the coming weeks.

However one point to come from the 15-hour Senate debate was the potential narrowing of eligibility requirements for the stimulus checks included in the package. The main factor deciding entitlement to the direct payments is Adjusted Gross Income (AGI), but what actually is it?

What is Adjusted Gross Income?

Included in the new covid-19 relief bill is a third round of stimulus checks worth $1,400, but that full amount is only provided for people whose AGI is below a certain threshold. The process is administered by the IRS, who base the decision on the tax filing details they have for previous years.

The IRS define AGI as “gross income minus adjustments to income”. Gross income is the total amount that you receive in a year and includes wages, dividends, capital gains, business income, retirement distributions as well as any other income streams.

The adjustments can include things like educator expenses, student loan interest, alimony payment and contributions to a retirements account, so these things will not be included in the AGI. For this reason your AGI can not be higher than your Gross Total Income, but may be lower if you have adjustments.

Because this is covered by the tax authorities, married couples who file jointly will have their incomes and adjustments bundled together to produce one figure.

Am I eligible for the third round of stimulus checks?

On Friday afternoon President Biden reaffirmed his promise on the next round of stimulus checks, saying: “They’re going to be $1,400. Period. That’s what the American people were promised”.

This will be a relief after a last-gasp attempt by a group of ten Republican senators to lower the amount to $1,000. However the exact requirements to receive the direct payments is yet to be confirmed.

Biden had initially hoped to widen the eligibility slightly, allowing adult dependents to receive both the $1,400 included in this bill and a retroactive payment for the $600 included in December’s emergency relief bill. It is thought this would provide stimulus checks for around 29 million more Americans.

However there have also been calls for some of the higher-earners to be excluded from this round of payments, to make the support more targeted. Biden’s plan had proposed the same threshold as previous bills; an AGI of $75,000 for an individual or $150,000 for a joint-filer.

During the Senate discussion on the budget resolution an amendment was raised which called for “upper-income taxpayers” to be excluded from the new stimulus check payments. The 99-1 vote in favour is not binding, but does show there is an overwhelming desire in Congress for the stimulus checks to be more focused on the lowest earners. It remains to be seen if Biden will choose to act on this.