⏩ Kathleen Pender: Who will get stimulus checks and how much will they get?
Most adults who got a $ 1,200 stimulus payment earlier this year will receive one for $ 600 if President Trump signs the latest coronavirus relief bill Congress passed late Monday.
Parents will get a slightly bigger payment, $ 600 instead of $ 500, for each dependent younger than 17.
Trump was widely expected to sign the bill, but in a surprise video tweeted Tuesday night, he said it “really is a disgrace.” He complained that the bill, which is paired with a broader spending plan, provides billions in foreign aid, and help for the Kennedy Center in Washington, D. C., and Smithsonian Institution, which are both closed. “It’s called the COVID relief bill but has almost nothing to do with COVID,” he said. Trump called on Congress to send him an amended bill that provides $ 2,000 per adult in stimulus, rather than $ 600.
The bill, however, passed with large, vetoproof
majorities in the House and Senate. Trump didn’t say he would veto the bill, but if he does, Congress would have to pass new legislation or vote to override his veto.
As passed by Congress, the bill will apply most of the Cares Act rules that applied to the first round of stimulus payments to the second round, although people who died before 2020 are now excluded and people who were previously excluded because someone in their household didn’t have a Social Security number are now eligible.
Amid a host of changes, the new bill also extends and expands the new
$ 300 deduction for charitable contributions for people who don’t itemize.
But first, here what has changed, and what hasn’t, for stimulus payments:
Eligibility requirements:
The first and second stimulus payments are technically credits against your 2020 taxes.
The Cares Act instructed the IRS to send the first round of payments in advance to anyone who qualified based on their 2019 tax return or if that wasn’t available, their 2018 return. Under the new bill, the advance payment must be based on your 2019 return.
That means some people who qualified based on their 2018 return may not qualify based on their 2019 return, or vice versa.
In either case, those who qualify based on their 2020 income, but didn’t get their first or second payment, can claim what’s due when they file their 2020 federal tax return on a new line
tentatively labeled “recovery rebate credit.”
For people who don’t have to file a tax return, the IRS can once again issue payments based on their Social Security, railroad retirement or veterans benefits, or on information they entered into the IRS web portal for nonfilers set up for the first round of payments.
People who filed a tax return, but did not have a direct deposit of a tax refund, could enter their banking information into a different web portal, called Get My Payment, to get their first stimulus payment directly deposited into a bank account. Presumably, the IRS could use that information to expedite the second payment, but it would not answer any questions until the bill is signed and it issues guidance.
More money for kids, less for adults:
Eligible adults will get up to $ 600 each under the new bill, compared with $ 1,200 under the Cares Act. Eligible dependents will get $ 600 each, up from $ 500 under the Cares Act.
To qualify for either dependent payment, the child must have been younger than 17 at the end of the tax year used to determine the payment. However, older children who are not dependents in 2020 can file their own tax return and claim both payments, even if their parents received payments on their behalf because they were dependents in 2018 or 2019, said Mark Luscombe, principal federal tax analyst atWolters Kluwer Tax & Accounting. Their parents would not have to forfeit the dependent payments they received, he added.
Income limits:
The first and second payments begin phasing out at the same adjusted gross income
levels: $ 75,000 for singles, $ 112,500 for heads of household and
$ 150,000 for married filing jointly. Above those thresholds, payments decrease by $ 5 for every $ 100 in additional income.
However, because the new adult payments are smaller than the first round, they will phase out completely at a lower income than the first payments. For adults with no children, the first payments hit zero once their income hit $ 99,000 ( single) or $ 198,000 ( joint). The second payments will phase out once their income reaches $ 87,000 ( single) or $ 174,000 ( joint).
The same phaseout applies to child payments.
Most dead people are excluded:
The Cares Act did not prevent the IRS from sending stimulus payments to people who were deceased if it had a 2019 or 2018 tax return on
file for them. As a result, it sent out more than 1 million payments to dead people before it reversed course and asked for those payments back.
The new bill prevents the IRS from sending payments to anyone who died before 2020, but allows them for people who died this year.
Relief for mixedstatus families: To get either payment, you must have a valid Social Security number. The Cares Act, however, prevented people who had a Social Security number from getting the first payment if their spouse or any children did not have a Social Security number, usually because they are undocumented.
Under the new bill, any family member with a Social Security number is eligible for the payment, even if others in the household don’t have a number and are not eligible.
What hasn’t changed: Neither stimulus payment is subject to federal or state income tax.
If you got the first payment or second payment based on your 2018 or 2019 income, but don’t qualify based on your 2020 income, you won’t have to pay it back.
Both payments are refundable, which means that if the credit based on your 2020 income is bigger than the amount of tax you owe for 2020, the difference will be paid out to you.
New rules for charitable deductions:
The Cares Act allows taxpayers who do not itemize deductions to deduct up to $ 300 in cash contributions to charities on their 2020 returns. The deduction is limited to $ 300 for single and joint filers and $ 150 for married filing separately, according to the IRS and its draft instructions for 2020 returns. The new bill extends this deduction for 2021, and allows joint filers to deduct up to $ 600 next year. It also imposes a penalty for overstating contributions.
The Cares Act also allows individuals who itemize to deduct cash contributions made in 2020 to qualified charitable organizations ( excluding donoradvised funds and supporting organizations) up to 100% of their adjusted gross income. The previous limit was 60% of income.
The new bill extends the 100% limit for 2021.