What Is Adjusted Gross Income? How to Calculate if You're Eligible for Third Stimulus Check

The next relief package could reduce the number of people who receive a stimulus check by lowering the cutoff for a payment to individuals with an adjusted gross income of $80,000.

Republicans have been pushing President Joe Biden to reduce the income eligibility for a payment and on Wednesday, they reportedly reached an agreement. As the package currently stands, the threshold for the full amount will still be $75,000 for individuals and $150,000 for joint filers, but would phase out significantly quicker than the first two rounds.

Under the package that passed the House of Representatives on Saturday morning, individuals with incomes of up to $100,000 and couples earning up to $200,000 would receive a reduced payment. For the third round, payments will completely phase out at $80,000 for individuals and $160,000 for joint filers, according to the Associated Press.

Eligibility is based on a person's most recent tax return and their adjusted gross income, which is, somewhat obviously, defined by the IRS, as gross income minus adjustments. Gross income factors in wages, dividends, capital gains, business income, retirement distributions and other forms of income. Adjustments include educator expenses, student loan interest, alimony payments or contributions to a retirement account.

stimulus check adjusted gross income eligibility
The third round of stimulus checks could phase out payments quicker than the first two rounds for individuals. In this Photo Illustration, Twenty dollar bills sit in a wallet on August 29, 2017, in San Anselmo, California. Justin Sullivan/Getty

There are a number of online tools to calculate your adjusted gross income, but a person can also do it with basic math, although there is room for errors to be made. The first step is to calculate your income for the year, which includes traditional salary and wages that are found on a W-2 form, earnings from self-employment and income reported on 1099 forms, such as investment dividends and income. Investopedia advises also adding up any of the below sources of taxable income:

  • Business income
  • Farm income
  • Union strike benefits
  • Taxable refunds, credits, or offsets of state and local income taxes
  • Long-term disability benefits received prior to minimum retirement age
  • Jury duty fees
  • Security deposits and rental property income
  • Awards, prizes, gambling, lottery and contest winnings
  • Back pay from labor discrimination lawsuits
  • Spousal support
  • Unemployment benefits
  • Capital gains
  • Severance pay
  • Earnings from rental real estate, royalties, partnerships, S corporations, trusts,

Then, a person has to calculate their deductions, which Nerd Wallet identified as:

  • Educator expenses
  • Certain business expenses
  • Deductible health savings account (HSA) contributions
  • Moving expenses for military
  • Deductible self-employment taxes
  • Contributions to retirement plans or health insurance for self-employed people
  • Penalties on early withdrawals of savings
  • Alimony paid
  • Deductible IRA contributions
  • Student loan interest
  • Deductible tuition and fees
  • Up to $600 of charitable contributions if you're taking the standard deduction

Subtracting the amount of deductions from income will leave a person with their adjusted gross income.

If that sounds like a lot of work, a person can also find their adjusted gross income on their tax documents. On a 2020 federal tax return, the adjusted gross income is listed on line 11 of Form 1040. If using a 2019 return, the adjusted gross income is on line 8b.