The third stimulus check is one of the biggest Economic Impact Payments Americans have seen yet. Distributed as part of a $1.9 billion relief fund signed into law by President Joe Biden last Thursday, it will give American families a much-needed boost. According to Treasury Secretary Janet Yellen, over 9 million people in the US are unemployed, 4 million are no longer in the labor force, and 2 million have had their hours reduced.
This time around, the threshold for income cut-offs is much lower, and many other changes have been made to determine who would qualify. Some may be getting a total of $1,400, while others may not be eligible for much.
Here’s what you need to know about the new bill and how it will affect you.
When will the third stimulus check arrive?
Those who have already set up direct deposit with the IRS will receive their stimulus checks first. According to the White House Press Secretary Jen Psaki, they’re doing everything they can to expedite the process, such as not having the President’s name on the check. After gaining experience sending out the first two stimulus checks, the third one is expected to be distributed entirely by the end of March.
What is the stimulus check based on?
The third stimulus payment will be determined by the latest tax return you filed. This can be critical as the income cut-offs for the third stimulus payment have significantly decreased compared to the last two stimulus payments. If you were laid off in 2020 or your income was less due to the pandemic than your 2019 tax return, it’s valuable to file your 2020 taxes as soon as possible. Just remember, the stimulus payments are not taxable, so the extra effort is worth it for some extra money in your bank account.
The IRS will be using your adjusted gross income (AGI) to determine how much money you will be receiving. Your AGI is your total taxable income (from work or if you’re self-employed), minus any deductions and credits you are eligible for.
How much of the stimulus check am I eligible for?
For US residents who file their taxes individually, you are eligible for the maximum payment of $1,400 if your AGI is less than $75,000. If you’re in-between $75,000 and $80,000, you can receive a partial payment if your income is upwards of $80,000; you’re out of luck for this round of stimulus checks.
For those who are the head of the household and file individually with dependents claimed on their taxes, you can receive the full amount with an AGI under $112,500. To receive a partial payment, your AGI must be between $112,500 and $120,000. Those with an AGI over $120,000 will be exempt from any stimulus checks.
However, the new bill will now be distributing stimulus checks to adult dependents 17 years and older. This means you can claim a stimulus check on behalf of high school students older than 17 years of age, college students, elderly adults, and disabled adults. Furthermore, US-born children of non-US citizens also qualify for the stimulus check.
The last two stimulus checks only included child dependents 16 years and younger. According to the Center on Budget and Policy Priorities (CBPP), there was “no clear policy rationale” for the restriction. Therefore, to better support families who need help and have adult dependents, the New American Rescue Plan will include them.
If you are married and filing a tax return jointly, to receive the maximum amount of $2,800, your combined income must be below $150,000. If your joint income falls between $150,000 and $160,000, you qualify for a partial payment. Anything above $160,000, unfortunately, doesn’t make you eligible for the third round of stimulus payments.
If you’re a non-filer, meaning that you are a part of a federal program such as receiving Social Security benefits and have qualified in the last round of checks, there is a good chance you’re qualified for this round as well. If you haven’t received the first two payments and are eligible, there should have been a letter sent out from the IRS that you’ll need to claim the missing payments. There is a catch to receiving your payments—you’ll need to file your taxes this year before the cut-off of April 15th.
Is there new Unemployment Aid?
If you’re currently unemployed, the good news is that the unemployment benefits have been extended under the passed bill. The benefits will continue until September 6th and also include an additional $300 a week. Moreover, households with income less than $150,000 will be exempt from the first $10,200 of unemployment benefits in taxes.
What about the Child Tax Credit?
Another change is the increase of the Child Tax Credit to $3,000 for children aged 6-17 and $3,600 for children five and younger. This credit will be temporarily increased for one year, providing millions of families with more support during a whirlwind of a year. Like the stimulus payment guidelines, single tax filers who have annual earnings less than $75,000 or joint filers with total income under $150,000 can claim this credit.
The Child Tax Credit will be distributed through $300 monthly payments starting in July till the end of the year. Additionally, this tax credit is refundable, which means if the credit is applied to your tax bill and covers the debt, you may receive some money back if there was still money left over. To claim the credit, you will need to fill in Form 1040 and have your children’s social security number ready.
Especially for this year, organizing your taxes can be a tough process. Talk to an expert about lowering your tax bill and getting all the credits you deserve.