On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law, which means millions of Americans will receive stimulus checks later this spring.
Had you told me in February that the stock market would tank, businesses and schools would be shut down worldwide, we’d be asked to stay at home indefinitely, and that lawmakers would be working across the aisle to pass a $2 trillion economic stimulus package, I wouldn't have believed it. And February wasn’t that long ago.
But here we are.
And soon, millions of Americans will be receiving stimulus checks to provide some short-term relief to help with the ongoing health and economic crisis caused by the coronavirus.
Today, I’m going to explain everything you need to know about the stimulus checks you may be receiving as part of the CARES Act.
2020 Stimulus Checks: What You Need to Know
Who will receive a stimulus check?
Almost any adult with a Social Security number will receive a government stimulus check from the IRS.
The amounts are $1,200 for individual adults, $2,400 for couples filing jointly, and $500 for each child under the age of 17. If you’re a dependent adult, the person claiming you will receive the payment in their household check.
These payments are phased out – or gradually reduced – based on your adjusted gross income (AGI). Here’s where the phaseout starts:
- $75,000 for singles
- $112,500 for heads of households (often single parents)
- $150,000 for married couples
- If you don’t have kids, singles are completely phased out at $99,000 and married couples are completely phased out at $198,000
Your stimulus check will start to shrink if you make more than those amounts. And the phase-out rate is $5 less for every $100 in income above those adjusted gross income amounts.
How much you can expect to receive
The amount you receive is based on your adjusted gross income, whether you’re single or married filing jointly, and if you have kids.
Here are some examples:
- A married couple with two kids making a combined $120,000/year will receive $3,400.
- A single parent of two kids making $45,500/year will receive $2,700.
- A single person making $82,000/year will receive $850.
- A married couple making $175,000/year with no kids will get $1,150.
- A married couple making $200,000/year with one child won’t receive a payment.
When you can expect your stimulus check
Direct deposit is the best way to get your stimulus check because paper checks can take anywhere from 2-3 weeks longer to receive. And some people with direct deposit have already started seeing stimulus checks hit their accounts.
Starting April 17, 2020, you can use Get My Payment, a brand new tool from the IRS, to track your payment. Eligible people will also be able to use Get My Payment to add their bank account information for direct deposit.
If your stimulus check has already been scheduled, you will not be able to use Get My Payment.
It’s okay if you haven’t filed your 2019 taxes yet
File your 2019 taxes ASAP if you haven’t done so yet. But the IRS will use your 2018 amounts if it needs to. And as a side note, the 2019 tax filing deadline has been extended to July 15, 2020.
If you’ve had a child, gotten married or divorced, experienced a death, or any other major life change that affects your taxes, I would make sure the government has your updated information. This is especially true if your income was drastically reduced in 2019, which will make you eligible for a larger stimulus payment.
Changes that weren’t made in time to be reflected in the stimulus check will be settled in your 2020 taxes.
Stimulus checks and your 2020 taxes
I’ve seen a lot of misleading information out there about “paying back” your stimulus check amount on your 2020 taxes. Here’s the reality: the IRS won’t ask for this money back as a direct payment on your 2020 taxes.
Inevitably, this money will have to be paid back – it’s added to the national debt – but it’s not a direct payment from you to the government in your 2020 taxes.
Your 2020 income taxes will determine the final amount you receive… I know this is confusing… and part of the misleading information is that the checks can be seen as an advance on your 2020 tax return.
Here’s what that means if your income or family size changes in 2020:
- If you qualify for more than you received, the difference will be reflected in a larger tax return or smaller tax payment in 2021 when you file your 2020 tax return.
- If you made more in 2020 than you did in 2019 (or 2018, if you haven’t filed your 2019 taxes yet), you will not owe the difference if your stimulus check was larger than it should be.
If your income is significantly less in 2020
If your income is significantly less in 2020, then you will be eligible for a credit if you were not able to claim the credit based on the income reported on your 2018 or 2019 returns.
The most recent unemployment numbers have already shown that millions of Americans will see their income drop in 2020. But because the stimulus checks are initially based on your previous year’s income, you might not see as large of a check if you’ve lost your job in 2020. As things stand now, you will unfortunately have to wait until 2021 when you file your 2020 return to claim the amount for which you are eligible.
It’s possible that the Treasury Department will create a program to get checks to these people sooner, but there haven’t been any announcements. This is a wait and see issue at this point.
Remember, you will see the difference when you get your tax refund or need to pay a smaller tax bill in 2021.
The IRS website is helpful, but many of the details are not clearly explained. Although I have no business affiliation with them, one useful resource for understanding changes in the law as they occur is The Tax Foundation.
If you are currently experiencing financial hardship, check out these articles for tips on saving money, making extra money, and managing your current finances:
What to do with your stimulus check
This is a great question, and the answer will have a lot to do with your unique financial situation. Most people will need to look at where they’re at and prioritize their financial needs. Here are some of the best places to focus your money:
Cover your basic needs
The main reason these checks are being issued is to help families with immediate financial stress. So, use your stimulus check to cover food, housing, children’s essentials, medicine, household supplies, and anything else necessary for daily life.
Crisis is a time to make sure your immediate needs are being met.
Build your emergency fund
An emergency savings fund is meant to help you with unexpected expenses, medical emergencies, job loss, or a drop in your income. Stashing your stimulus check aside to prepare for any of those things is a really smart financial move.
Make sure your emergency fund is easy to access – investing it isn’t a great idea. But putting up some kind of barrier, like saving it at a different bank than you normally use, will prevent you from spending it on extras.
Read more at Best Online Savings Accounts in 2020.
Take care of your debt
Debt payments can make it harder to take care of essentials, so if you have high-interest rate debt, you might want to use your stimulus check to pay some of it off.
However, keep in mind that as part of the stimulus package, federal student loan payments have been suspended until September 30, 2020.
Frequently asked questions about the 2020 stimulus checks
Are the stimulus checks considered taxable income?
No, this isn’t considered taxable income.
What if I have a baby in 2020?
This question is relevant to me – my wife and I are expecting our first child later this year. Parents who have children in 2020 won’t see the $500 per child amount now. It will be reflected in 2021 refunds or tax bills assuming your 2020 income qualifies you for a stimulus check.
What about people on Social Security?
Senior citizens, some veterans, some with disabilities, and anyone else who receives Social Security will get a stimulus check. But they will need to file a “simple tax return.” They won’t owe taxes, but it’s how the IRS will make a check available.
There will be more information on the site the IRS has set up for the stimulus checks.
Who doesn’t get a stimulus check?
People who are claimed as dependents, nonresident aliens, and anyone who doesn’t have a Social Security number.
Are there stimulus check scams?
I haven’t heard of any yet, but I wouldn’t be surprised if we hear about some – this is an unfortunate reality. Here’s how to watch out for potential scams:
- You won’t have to pay anything to receive your check.
- You will never have to provide your Social Security number (it’s already on your taxes).
- Setting up direct deposit is the only time you need to give your bank account info. Never give this out over the phone, or anywhere else.
You can read more about this from the FTC.
Where can I read more about the stimulus checks and the entire stimulus package?
When was the last time the government issued stimulus checks?
These are by far the largest stimulus checks we’ve ever seen, but there have been three rounds of stimulus checks in the past 20 years.
- 2009: Beneficiaries of select retirement programs received $250 under the Economic Recovery Payment of 2009.
- 2008: Americans saw stimulus checks issued for the Economic Stimulus Act of 2008. The amounts were $300-$600 for singles, $1,200 for married couples, and $300 per child.
- 2001: The Economic Growth and Tax Relief Reconciliation Act of 2001 sent checks of $300 for singles and $600 for couples married and filing jointly.
The final word on the 2020 stimulus checks
Stimulus checks are meant to provide some financial relief, and hopefully, these payments will do just that for millions of Americans whose finances have been affected in this crisis. There’s no telling what will happen in the next few weeks or months, so make smart money choices with your check so you can stay afloat.