Do You Know Your Adjusted Gross Income?
Eligibility and the amount for tax credits such as the recovery rebate credit (aka stimulus payments to individuals), Child Tax Credits (expanded for 2021), education credits, and other popular credits depend on Adjusted Gross Income (AGI). This number can be found on your 2020 tax return on your Form 1040, line 10c https://www.irs.gov/pub/irs-pdf/f1040.pdf .
Most people file electronically using tax software, but it’s a good idea to review your forms, find your AGI, and understand the factors that impact your annual AGI. Basically:
Adjusted Gross Income = Total Taxable Income – Adjustments
Understand that gross income can be different from taxable income. For example, Ida has a gross income of $45,000, and contributes $4,500 to a tax deferred retirement plan and $1,500 to a Health Savings Account. Ida’s taxable income is reduced to $39,000.
Adjustments to income can decrease or increase AGI. Income such as alimony (if the divorce decree is after 12/31/2018), unemployment income, and self-employment income can increase AGI. Common examples of items that can decrease AGI include educator expenses (K-12 teachers), contributions to a traditional IRA, student loan interest, and tuition expenses. For a full list if adjustments that can increase or decrease income, see Schedule 1 of Form 1040 https://www.irs.gov/pub/irs-pdf/f1040s1.pdf
For tax filing years 2020 and 2021, there is a special above-the-line deduction of up to $300 in 2020 and in 2021 up to $300 for single or $600 married filing jointly for cash gifts to charity. This means that a taxpayer can take the standard deduction (most Florida tax filers do not itemize) and still take this special charitable deduction and reduce their AGI.