Tax filing 2021: are stimulus checks taxed?
You won’t have to pay tax on your stimulus check, but information from your tax return will be used to calculate the amount you qualify for.
Congress is gradually working towards passing the covid-19 economic relief bill, the American Rescue Plan, proposed by President Joe Biden shortly before he took office. The $1.9 trillion package includes a round of $1,400 stimulus checks for eligible Americans.
Although the Senate is on recess this week, House Democrats will keep working through the details of the new stimulus bill. They expect to finalise the bill and vote on it as soon as next week. Then it will be sent over to the Senate, where lawmakers will pick through the legislation with amendments and negotiations to ensure that all 50 Democreatic senators will vote in favour.
Democrats are working fast to avoid the expiry of expanded unemployment benefits and other pandemic-related programs in mid-March. To speed along the process the Democrats are using a tool called budget reconciliation, whereby they can sidestep a 60 vote majority, which would require at least 10 Republicans in the Senate to vote with Democrats for the bill to pass.
Will I get taxed on my stimulus checks?
This is an interesting one. You’d think so, given that the tax code says you have to pay taxes on "all income from whatever source derived," unless it's specifically exempted.
However, you do not have to pay tax on the income you receive as a federal stimulus check. That’s because it’s not classed as income at all, in the eyes of the law it’s actually an advance payment of a tax credit. And tax credits aren’t taxable income.
When could a third stimulus check arrive?
The process for sending a third stimulus check will largely mirror the first two, though this time because of budget reconciliation, the process in Congress could be far quicker, as Democrats - narrowly - control both the House and the Senate.
The bill would need to pass through both chambers of Congress, Biden will then sign it into law, and finally the IRS will do its work of sending checks out through various means.
Speaker of the House Nancy Pelosi said on Thursday that she’s hopeful that her chamber can pass the $1.9tn bill by the end of February, adding that shortly afterwards is when she hopes that checks will be landing in the bank accounts of eligible Americans.
It’s important to note that in the process of passing the stimulus bill through Congress there are likely to be negotiations and possible amendments, all of which could cause days or weeks of holdups to Pelosi’s proposed schedule.
There are 12 House committees working on pieces of the Democrats' covid-19 relief bill based on the framework of President Biden’s American Rescue Plan. So far the Ways and Means, the Education and Labor, Financial Services, Transportation and Small Business Committees have passed their pieces of the proposal.
Your tax return will be used to calculate your stimulus bill
The main deciding factor in eligibility is the Adjusted Gross Income (AGI) of a filer or joint-filer, which is defined by the IRS as “gross income minus adjustments to income”.
Your AGI is the total amount of money that you receive in a year through wages, dividends, capital gains, business income, retirement distributions and any other income streams you may have minus certain adjustments like student loans, alimony, tuition fees and certain self-employment expenses.
Find out how to check your AGI.
If your income was down in 2020, you should file your taxes right away - now! - ahead of the next stimulus payment:— Amy Siskind 🏳️🌈 (@Amy_Siskind) February 15, 2021
"The reason: The IRS relies on each individual's most recent tax filing to determine their stimulus check payment." https://t.co/M06OMszsJo
Te recomendamos en English
- TOKYO OLYMPICS Tokyo Olympics cancellation remains an option, says top Japanese politician
- NBA Dallas' Doncic on game-winning three-pointer: "Those are the best feelings ever"
- US NEWS A new proposal to revamp unemployment systems and increase benefits announced
- DEREK CHAUVIN TRIAL Derek Chauvin pleads the Fifth Amendment: what is it, and what are the defendant’s rights when they invoke it?
- CORONAVIRUS STIMULUS CHECKS Veteran third stimulus check: when is it arriving & how much?
- CORONAVIRUS STIMULUS CHECKS Fourth stimulus check: why could it be unlikely?