*UPDATED AS OF MARCH 24, 2020
A third stimulus is on the way.
The American Rescue Plan was signed into law on March 11th. The plan includes a third round of stimulus payments for millions of people. In addition, the bill also extends certain unemployment benefits and expands tax relief for unemployment benefits, the Child Tax Credit, and the federal Earned Income Tax Credit (EITC). Here’s a rundown of what’s included and what it means for you.
Am I Eligible for the New Stimulus Check?
Families earning less than $150,000 a year and individuals earning less than $75,000 a year should get the full $1,400 per person. Families earning up to $160,000 per year and individuals earning up to $80,000 per year will receive prorated stimulus checks for less than $1,400 max.
Unlike the previous two rounds, you will receive stimulus payments for all your dependents, including adult dependents and college students.
If you have an adjusted gross income (AGI) of up to $75,000 ($150,000 married filing jointly), you should be eligible for the full $1400 stimulus payment.
*Note, adjusted gross income (AGI) is your gross income like wages, salaries, or interest minus adjustments for eligible deductions like student loan interest or your IRA deduction. Your AGI can be found on line 8b of your 2019 Form 1040 or on line 11 of your 2020 Form 1040.
As your AGI increases over $75,000 ($150,000 married filing jointly), the stimulus amount will go down. The stimulus check rebate will completely phase out at $80,000 for single filers with no qualifying dependents and $160,000 for those married filing jointly with no dependents.
Once again, mixed-status households (households with different immigration and citizenship statuses) will be eligible for stimulus payments.
How Will I Get My Stimulus Check?
Although you may want to file your 2020 return now in order to provide your most recent information to the IRS, including bank account information, you don’t need to do anything to get your stimulus check. The IRS will determine eligibility based on your last tax return, either 2019 or 2020, and will likely send your payment to the bank account where your tax refund was deposited.
As part of the income tax filing, the IRS receives accurate banking information for all TurboTax filers who received a tax refund, which the IRS is able to use to quickly and effectively deposit stimulus payments.
Timing for the third stimulus check hasn’t been announced yet.
Extended Unemployment Benefits
Unemployment payments will increase by $300 per week and the benefits will be extended through September 6, 2021.
The bill extends the Pandemic Unemployment Assistance (PUA), which expands unemployment to those who are not usually eligible for regular unemployment insurance benefits. This means that self-employed, freelancers, and side giggers will continue to be eligible for unemployment benefits.
The bill also makes the first $10,200 of unemployment income-tax-free for households with income less than $150,000. This provision would be retroactive to the tax year 2020 (the taxes you file in 2021).
Student Loan Deferment
The American Rescue Plan provides relief to students with government and federal student loans by allowing students with forgiven loan debt to exclude the discharged debt from their taxable income for tax years 2021 through 2025.
The provision does not apply to loans made by private lenders.
President Biden’s January executive order also further extended the suspension of federal student loan payments and interest through the end of September 2021.
Added tips on how to use the stimulus check:
If you are in any kind of financial hardship or income reduction – consider using your stimulus payment to pay for your essential expenses. If the stimulus payment and unemployment will not be enough, call your lenders or banks directly and try to work out a reasonable payment plan or see if they can defer (with no interest) any of your payments.
If you need access to additional loans, do your due diligence and find the best option for your situation.
If you currently have a job but are worried about your or a spouse’s job security – Consider stopping any extra debt payments you are making right now and save all extra cash into your emergency fund. You can use any cash you have leftover to make your deferred extra payments when things get back to normal.
If you have a job and aren’t worried about income fluctuations, you can keep going with business as usual including investing and making extra debt payments but also make sure you have an emergency fund that can cover at least 6 months worth of living expenses. You could also consider helping your family, friends and community with any extra income you may be lucky to donate or lend.