Updated at 9:10am PST on April 2nd, 2020
President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on Friday March 27th, 2020. This $2 trillion stimulus package is the largest relief bill in the history of the United States, with 9 out of 10 Americans receiving some sort of financial assistance from the government.
The bill will send a one-time direct deposit starting at $1,200 for qualified individuals known as a recovery rebate.
Update: The IRS announced you will not actually be receiving a check in the mail, but instead you will receive financial assistance via direct deposit. If you already have direct deposit set up with the IRS from your latest tax filing, you don’t have to do anything. If not, I explain what you must do below.
While the bill helps in so many ways, the focus of this post will be on how it will help individuals only. From how much you will get, when you can expect it, unemployment benefits, mortgage assistance, and a lot more. The post however will not cover anything related to small-business owners or large corporations who will also benefit from the bill.
How Much Will My Coronavirus Check Be?
Remember, you are not actually getting a check in the mail, but rather a direct deposit to whatever banking information the IRS has on file for you.
The amount of cash assistance you will receive from the recovery rebate will be based on your federal taxable income for 2018. However, if you have already filed your 2019 taxes, then the amount you receive will be based on the most current filing.
If You’re Filing Single
For those who are filing single and making $75,000 or less per year, here’s what you can expect:
- Each individual filing single will receive up to $1,200 from the government
- For every child in your household under age 17 (or 16 years or younger), you will receive $500 per child
What if you make more than $75,000?
If your income is above $75,000 but less than $99,000, the amount you receive will phase out. If your income goes above $99,000 for filing single, then you will not receive any cash assistance.
The math is pretty simple: for every $100 you earn above $75,000, your cash assistance will drop by $5. For example, if you make $80,000, then you will receive $250 less than the $1,200 — which is $950.
Example: Individuals making $90,000 per year would get $450. ($90,000 – $75,000 = $15,000*0.05=$750, $1,200 – $750 = $450).
Below is what you can expect to receive if your adjusted gross income fell between $75,000 and $99,000. As your income increases from $75,000 to $99,000, the amount you will receive will decrease by 5% for every $1,000 increase in income.
If You’re Filing Jointly
For those who are filing jointly as a couple and making $150,000 or less, you can expect:
- Each couple to receive up to $2,400 cash assistance
- For every child in your household under age 17, you will receive $500 per child
Example: A family of four with children ages 10 and 16 who have an adjusted gross income of $90,000 will receive $3,400 ($2,400 + $500 for each child).
What if you make more than $150,000?
If your total family income is above $150,000 but less than $198,000, the amount of you receive will also phase out. If your adjusted gross income is above $198,000 for married couples, you will not receive any cash assistance.
For every $100 you earn above $150,000, your rebate payment will also drop by $5. For example, if you make $170,000, then you will get $1,000 less than the $2,400 — which is $1,400.
Below shows what you can expect to receive if your adjusted gross income is between $150,000 and $198,000. As your income goes up, the amount you will receive will decrease by 5% for every $1,000 increase in income.
Example: Married couples making $170,000 per year would get $1,400. ($170,000 – $150,000 = $20,000*0.05=$1,000, $2,400 – $1,000 = $1,400).
Note: Incomes are shown in increments of $2,000.
What if I’m Filing as Head of Household?
If you are a single parent or for whatever reason you file as Head of Household — there is good news for you as well.
This increases the phase out amount you would have as a single filer. Instead of phase out amounts between an income of $75,000 and $99,000, those filing head of household start phasing out between $112,500 and $136,500. The same rules apply as for both married and single filers: $5 decrease in recovery rebate for every $100 in income.
$500 for Each Eligible Child
Parents who are filing jointly or as an individual will receive $500 for each child under age 17. To clarify, if your child is 17 they do not qualify. But, if they are age 16 or younger, then they would qualify. The definition of eligible child comes from the Child Tax Credit definition per the IRS.
There is not a limit to how many children will qualify. If you have 2 children under the age of 17, then you would receive $1,000 in addition to the stimulus based on your income. If you have 5 children, then you could expect $2,500 additional assistance.
Note: If your income puts you above the income limits for receiving the stimulus, don’t expect to be eligible to receive $500 per child.
Will Retirees and Those On Social Security Receive Help Too?
Yes. Even for those who don’t file a return because they earn less than the gross income threshold will receive direct deposit from the IRS. The bill states that if no tax return was filed, they will use the information from the Social Security Administration to determine the rebate amount.
This stimulus also applies to those who are on disability.
How Is My Income Determined?
Your income will be based off your Adjusted Gross Income for your 2018 income tax return. However, if you have already filed your 2019 tax return, then it will be based off of your most current return.
What if I lost a substantial amount of income in 2019 versus 2018?
If your income decreased from 2018 to 2019 and you haven’t filed your 2019 taxes yet, then you may be thinking you are missing out on some or all of the stimulus.
The good news is if you are due more money, you will receive the rest of it when you file your 2020 return.
The final amount of the stimulus benefits are determined based on your 2020 income and finalized on your 2020 tax return. This means anyone who qualifies for more money than they received this year would get the rest through either a larger tax refund or a smaller tax payment in 2021.
Example: You made $100,000 in 2018 but dropped to $70,000 in 2019. If you haven’t filed yet, you wouldn’t receive the stimulus right now since the IRS can only go off your latest return. However, in spring 2021, you would have the $1,200 stimulus added to refund or make a $1,200 smaller tax payment.
It’s an Advanced Tax Credit – What Does This Mean?
Yes, I know this sounds confusing so let’s break it down. First and foremost – you will be getting actual money direct deposited into your account you have on file with the IRS.
The IRS has created a new tax credit that will show up during your 2020 filing (Spring 2021). However, instead of waiting until 2021 to receive the credit, you are now going to get it early — an advanced tax credit.
The question we all have right now is this: when I file my 2020 return (in 2021), will I have to pay back the refund amount if things change and I happen to owe taxes next year?
The answer no. This is a tax credit which means you will NOT have to pay anything back to the IRS.
Will I Pay Taxes on My Stimulus?
Simply put — no, this is NOT taxable income.
Contrary to what many speculated about the government taxing everyone who receives their $1,200, this is not the case.
Where Do I Sign Up?
You don’t because there is no sign up. Payments will be automatically send to those who have filed a tax return or received any Social Security benefits.
How Will the IRS Send Me Money?
The IRS announced they are NOT going to send checks in the mail after all. This means the only way your’e going to get the money is via a direct deposit. Your direct deposit information you have had on file with the IRS with your latest tax filing (2018 or 2019) is where the IRS will be sending your financial relief.
What If Haven’t Filed in the Last Two Years?
If you haven’t filed yet, the IRS recommends you file a simple tax return as soon as possible. This is a very basic return with information like filing status, number of dependents and your bank information where the IRS can send your financial relief.
If you would rather file a simple tax return via the mail, you can fill out form 1040 here. This hasn’t been officially announced yet, but the IRS may be creating a website portal where you can update your direct deposit information online.
Is this Just a One-Time Payment?
For now, yes. However, Speaker Pelosi did say in a statement they could revisit this in the future.
What if I Owe Back Taxes?
So far the bill does not have any language in there excluding you from getting a stimulus if you owe past due taxes. However, I would not be surprised if the IRS does eventually say “no” to those owing back taxes.
Other Notable Benefits For Taxpayers During Covid-19
$600 Per Week Added to Unemployment Benefits
If you are currently filing for unemployment benefits, there is more good news for you.
The bill also adds an additional $600 per week for the next thirteen weeks (four months) in addition to what you will already be receiving from your state’s unemployment benefits. This bill also adds workers usually not covered by unemployment from gig economy workers, furloughed employees and freelancers.
Per the Labor Department, the average weekly unemployment check for February 2020 was $372. Using this average, the unemployment benefit would increase from $372 per week to $972 per week for the next four months.
In addition to the 13 weeks of the additional $600 per week, those still claiming unemployment can extend their unemployment claims for an additional 23 weeks (39 weeks total). See example in the next section below.
“Pandemic Unemployment Assistance”
Those who are self-employed, independent contractors, and other individuals who are unable to work as a direct result of COVID-19 now can claim Pandemic Unemployment Assistance (PUA). Prior to this bill, they were excluded from claiming regular unemployment benefits per state law.
This assistance are only for those who are unable to work for any period of time between January 27 – December 31st 2020 as a result of COVID-19. The maximum duration of unemployment benefits can last up to 39 weeks (10 months).
Example: The average unemployment is $372 per week. With the new stimulus bill, a person who is unemployed will be eligible for $972 ($372 + $600) for 13 weeks and then will receive $372 per week for the next 23 weeks.
Note: Unemployment benefits are still taxable and vary by state.
Emergency Mortgage Relief
Borrowers of any government-backed mortgage (Fannie Mae, Freddie Mac, HUD, VA, and USDA loan) can request a 180 day forbearance from their mortgage company by explaining their hardship due to the Coronavirus emergency. After 180 days the borrower can request an additional 180 days if needed. No additional fees, interest, or penalties can be accrued during this time.
If a borrower is currently facing foreclosure, the bill states that except for a vacant or abandoned property, foreclosure cannot happen for 60 days. This applies to both foreclosure sale or foreclosure related eviction and goes for 60 days from March 18th – May 17th, 2020. You can see more detailed information on mortgage relief during COVID-19 here.
Student Loan Relief
The federal government has set the interest rate on all federal student loans to zero percent for six months. Borrowers can also delay payments without penalty through September 30th, 2020. Interest on the student loan will not accrue any interest for the next six months and your credit will not be negatively affected during this period.
Note: This does NOT apply to private student loans.
To learn more about Student Loan relief, check out the interview with student loan expert Robert Farrington here.
Loosened Restrictions on Health Savings Accounts
Up until the bill passed, you could only use your Health Savings Accounts for qualified medical expenses per the IRS. One of the no-no’s on the list was over-the-counter (OTC) medications if not prescribed by a doctor. That has since changed and you can now use your pre-tax dollars from your HSA for all OTC medications and feminine hygiene products.
Penalty-Free Withdrawal from IRA or 401k
If you tested positive for COVID-19 and facing a financial hardship because of it, you now make up to a $100,000 early withdrawal from their retirement account without paying the 10% penalty to the government. This waives the penalty to anyone age 59 1/2.
Note: These distributions are only for an individual diagnosed with COVID-19 or whose spouse or dependent has been diagnosed or who experiences financial hardships due to the virus.
If you choose to re-contribute those funds back to your retirement account, you will have the next three years to do so. If you don’t repay the amount, then you will have three years to make the tax payments that were due from the withdrawal.
The amount you can borrow from your 401k will also increase from $50,000 to $100,000, and those who are due to pay the loan back in 2020 will get another year to do so.
Lastly, required minimum distributions (RMDs) for those who are age 70 1/2 or older will no longer have to take those distributions for the rest of 2020 which also means they will not be paying taxes on any RMDs as well.
Tax Filing Extension
The Federal Government also extended the deadline to file 2019 income taxes from April 15th to July 15th. This means you will have three more months to file and you will not incur a penalty or accrue any interest on the amount you will owe at filing time.
Still Have Questions?
Ask your question in the comments below and I will get back to you with any credible information I can find. Also, I will continue to update this post over the next few days as more information comes out in regards to the Coronavirus Stimulus Plan.