A stimulus check from the U.S. Treasury on a computer keyboard.

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Millions of dependents left out of the first two rounds of stimulus checks will now be included.

Now that President Joe Biden’s $1.9 trillion American Rescue Plan has passed the Senate, it’s on its way back to the House of Representatives for final approval. You may wonder how this direct payment differs from the first two, and if it will be enough to help you with expenses incurred during COVID-19. One of the significant changes involves sending direct payments to a larger number of dependents. Here’s how the new eligible dependent categories break down:

Children under 17

While children under 17 were eligible for the first two rounds of stimulus funds, this time, they’re going to receive more. Lawmakers earmarked $500 for each qualified dependent last spring and $600 per eligible dependent in December. This time, each eligible dependent — regardless of age — will receive $1,400.

High school students over the age of 16

In retrospect, it seems a bit arbitrary that Congress decided to send stimulus money only to dependents under the age of 17 in 2020. After all, many high school students are between the ages of 17 and 19. You can now expect to receive $1,400 for any high schoolers you have over the age of 16.

Young adult dependents

If you’re supporting a young adult in college (and still claim them as a dependent on your tax return), you can expect to receive $1,400 in stimulus funds to be added to your direct payment.

Disabled adult dependents

If you care for a disabled adult, pay more than half their expenses, and claim them on your annual tax return, a stimulus check is allocated for them. As with your young adult dependents, the funds will come directly to you.

Elderly dependents

If you’re caring for an elderly parent, provide more than 50% of their annual support, and claim them as a deduction on your tax return, you can also expect a $1,400 check on their behalf. If your parent still files their own tax return or someone else claims them on their taxes, the funds will go to the taxpayer. If you have any questions about who is entitled to claim a dependent, IRS Publication 501 lays it out for you.

Do not worry if your check excludes an eligible dependent. You can claim the funds by filling out line 30 on your 2020 tax return — the Recovery Rebate Credit. If you’ve already filed your 2020 taxes, you can quickly amend it to include the rebate by filling out Form 1040-X.

You can use the same Recovery Rebate Credit to recoup the first two stimulus checks on behalf of a child born or adopted into your family in 2020.

Here’s what you can expect if you claim the Recovery Rebate Credit: The IRS will add the money to your tax refund. For example, if you are owed a $1,000 federal tax refund and $1,100 in direct stimulus payments, the IRS will send you a total of $2,100. If you owe taxes for 2020, the IRS will deduct your Recovery Rebate Credit amount from the amount owed. Let’s say you owe $2,500, and your credit is $1,100. The IRS will keep the $1,100 and your tax debt will drop to $1,400 ($2,500 – $1,100 = $1,400).

Maximum income

Watching Congress debate who should (and should not) receive another round of direct stimulus payments was like watching a ball spin around a roulette wheel. It was impossible to know precisely where it might land. Finally, we have a clear picture of who is eligible for the full $1,400 stimulus payment.

SingleAGI below $75,000AGI of $80,000 or more
Head of householdAGI below $112,500AGI of $120,000 or more
Married, filing jointlyAGI below $150,000AGI of $160,000 or more

This is a sweeping bill, with funds focused on health, social, and financial hotspots. It is designed to increase the rate of vaccinations, get schools open, keep local and state governments up and running, and help small businesses hang on until society returns to its new normal. And now, it is focused on getting direct payments to a wider range of dependents. Ideally, as these direct stimulus payments begin hitting bank accounts, families can use the money to tide them over until enough Americans are vaccinated to put this chapter behind us.

In the meantime, if you’re in over your head due to COVID-19, visit our coronavirus hardship loan page to learn if you’re eligible for a loan to help get you through.

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Source: https://www.yahoo.com/finance/m/d054b31b-070e-329a-a569-a5ae0f5d33b1/stimulus-check-update-5.html

Categories: Politics

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