We’re inching closer to a third stimulus check. After some unexpected delays, the Senate finally passed the bill containing President Biden’s $1.9 trillion stimulus package on Saturday. The bill authorizes a new round of $1,400 stimulus payments, but don’t start counting your money quite yet – there’s still some more work to be done before the bill is finalized.
The House already passed a version of the stimulus bill on February 27. However, since the Senate made changes to the bill before passing it, the House will have to vote on it again. (Both houses of Congress must approve the same version.) That creates the possibility of additional changes to the stimulus check provisions. For instance, progressive Democrats in the House could object to the more aggressive stimulus check phase-out rate in the Senate bill. There are also other provisions in the bill – not related to stimulus checks – that could cause problems with House Democrats. If they don’t agree to the Senate bill “as is,” then the House and Senate will have to work out their differences before a final bill can be sent to the president for his signature.
Democrats want to send a final bill to President Biden by March 14. That’s when the current expanded unemployment benefits run out. If the House doesn’t pass the Senate version of the stimulus bill, or work out a compromise quickly, that goal will be in jeopardy.
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More “Targeted” Stimulus Checks
Led by Sen. Joe Manchin (D-W.Va.), a handful of Democratic Senators were able to force a change to the bill that makes the stimulus check provisions more “targeted” to people who need assistance the most. This is accomplished by reducing (“phasing-out”) payments to wealthier people at a much faster rate. As a result, according to the Institute on Taxation and Economic Policy, nearly 12 million American adults who would have received a partial third stimulus check under the House-approved bill won’t get any payment under the current bill as passed by the Senate.
Who’s shut out by the Senate bill? People who file their tax return using the “single” filing status with an adjusted gross income (AGI) between $80,000 and $100,000; “head-of-household” filers with an AGI between $120,000 and $150,000; and married couples filing a “joint” return with an AGI between $160,000 and $200,000. These people would have gotten a reduced third stimulus check under the House bill, but they won’t get any money under the bill approved by the Senate.
Under both versions of the bill, singles with an AGI above $100,000, head-of-household filers with an AGI exceeding $150,000, and joint filers with an AGI over $200,000 won’t receive any third-round stimulus payments. For more on who will or won’t get a third stimulus check under the current bill, see Who Won’t Get a Third Stimulus Check Under the New Senate Plan?
To calculate the amount of YOUR third stimulus check (based on the bill passed by the Senate), use our handy Third Stimulus Check Calculator. All you have to do is answer three easy questions to get an estimated payment amount.
$1,400 for Dependents
In addition to the $1,400 base amount for all eligible Americans, the current bill calls for an additional payment for each dependent in your family. Unlike the first two stimulus payments, all dependents – regardless of their age – would qualify for the extra payment under this legislation. For first- and second-round stimulus checks, only dependent children 16 years old or younger qualified for the add-on. That meant no extra payments for your older children, including college students age 23 or younger, or elderly parents living with you. That won’t be the case for your third stimulus check.
Payments Based on 2019 or 2020 Tax Return
Under the current bill, the amount of your third stimulus check will be based on either your 2019 or 2020 return. If your 2020 tax return isn’t filed and processed by the time the IRS is ready to send your third stimulus payment, the tax agency will use information from your 2019 tax return. If your 2020 tax return is already filed and processed when the IRS starts to process your payment, then your stimulus check will be based on information found on that return. If your 2020 return is filed and/or processed after the IRS sends you a stimulus check, but before July 15, 2021 (or September 1 if the April 15 filing deadline is pushed back), a second payment will be sent to you for the difference between what your payment should have been if based on your 2020 return and the payment actually sent based on your 2019 return.
If you haven’t already filed your 2020 tax return, this will create some opportunities to “game” the system and increase the amount of your third stimulus check. For instance, if you’ll get a larger check based on your 2020 tax return, than you might be able to quickly file your 2020 return electronically and have your third stimulus check based on that return. If you’ll get a bigger check if it’s based on your 2019 return, then just wait until after your payment is sent to file your 2020 return. For more on this, see How Filing Your Tax Return Early (or Late) Could Boost Your Third Stimulus Check.
Stimulus Checks Won’t Be Taxed
As with the first- and second-round payments, you won’t have to pay tax on your third stimulus check. Stimulus checks will actually be advance payments of the recovery rebate tax credit for the 2021 tax year. As such, they aren’t included in taxable income.
You also won’t have to repay any stimulus payments when you file your 2021 tax return. That’s true even if your third stimulus check is greater than your 2021 credit. If your third stimulus check is less than your 2021 credit, you can claim the difference as a recovery rebate credit when you file your 2021 return next year.
For more information about the Senate stimulus check plan – such as eligibility requirements, garnishment of payments, checks for dead people, and methods of payment – see The Current Plan for a $1,400 Third Stimulus Check.
Source: kiplinger.com