President Biden signed the American Rescue Plan Act of 2021 into law, which means a third stimulus payment could be coming your way.
How much will eligible taxpayers receive this round?
As part of the American Rescue Plan, eligible individuals and heads-of-household can receive up to $1,400. Those filing jointly can receive up to $2,800. Families will receive an additional $1,400 for each dependent. These payments are not taxable.
How is eligibility for the third stimulus payment decided?
Taxpayers must have a Social Security number to be eligible for payment. Stimulus payments will be based on your most recent tax returns, which means that if you haven’t yet filed for 2020, it will be based on your 2019 tax information. Individuals who earned less than $75,000 and heads-of-household earning less than $112,500 per year will receive $1,400. If you’re filing jointly, you’ll receive $2,800.
How does this differ from the other stimulus payments?
Payments phase out to zero for singles at $80,000, $120,000 for heads-of-household, and $160,000 for joint filers – regardless of whether they have dependents, which differs from the second economic impact payment.
The third stimulus payment is the largest taxpayers have received. The first, under the CARES Act, was $1,200. The second, passed late December of last year, was $600. A major change from the other stimulus payments is the qualification for dependents – previously, dependents were specified as those who were 16 and younger. For the third stimulus payment, all dependents are qualified, regardless of age.
Unlike the first round, these payments cannot be reduced for child support payments, but there is no provision to protect against garnishment by creditors or debt collectors. Those who passed away prior to January 1, 2021 will not be eligible to receive a third stimulus payment – this also applies to trusts and estates. If you receive a payment addressed to a deceased spouse, for example, you will have to return it.
How will payments be sent?
Similarly to the other two rounds, payments will be sent via direct deposit. If direct deposit has not been set up, you should get the payments in the mail via check or pre-paid debit card. If you haven’t received your first or second stimulus check, but believe that you qualify, you will have to claim a Recovery Rebate Credit on your 2020 tax return.
Have questions about the third stimulus payment?
If you have questions or concerns about the third stimulus payment or how other elements of the American Rescue Plan Act of 2021 may affect you, please contact us today.
The Team at Chatterton & Associates
Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither Royal Alliance Associates, Inc., nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.