Eligible Americans with IRS direct deposits will begin to see their coronavirus relief checks by the end of next week, according to the Trump administration. But many people are still unsure how much they’ll receive, whether they’ll receive anything at all, or whether they’ll have to pay it back to the federal government at a later date.
The short answer is: No, you will not need to pay back the relief check. Not this year, not next year.
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When Congress’s $2 trillion relief package was being negotiated, lawmakers considered giving every American a check and then taxing that amount for those above a certain income threshold. The purpose of this stipulation was to make sure that the money was only going to those who needed it. But this idea was tossed out.
Instead, Congress decided to rely on your 2018 tax returns (or your 2019 tax returns if you’ve already filed) to determine how much relief you’ll receive from the federal government. So, whatever you receive in the next couple of weeks is yours, and it will not be taxed.
How much you’ll be receiving from the federal government depends on a couple of factors: your income and how many dependents you have. The maximum amount is $1,200 for individuals or $2,400 for married couples, with an additional $500 for each qualifying dependent child under 17. To receive the maximum amount, you must have made $75,000 or less in 2018, or 2019 if you filed this year.
The higher your adjusted gross income is, the less money you’ll receive. Single filers with an income of $99,000, or married couples with a joint income of $198,000 will not receive a stimulus check at all, according to the legislation.
The reason there’s been so much confusion surrounding the relief checks is because they are technically an advance of a special tax credit for the 2020 tax year. You will technically need to claim the credit on your 2020 taxes, but it will not reduce the total amount of your tax bill, nor will it be held against you when you file. The relief checks are nontaxable income, according to the legislation, so the checks will not increase your taxes next year, nor will they decrease your overall bill. In short, they won’t affect it at all.
If you’ve heard the phrase “There’s no such thing as a free lunch,” then you know that the relief package will have its own costs. We are increasing the federal debt significantly, which will affect taxpayers indirectly in the future. What that cost looks like, though, and when it will be exacted is not an immediate problem.
So if you see the relief check appear in your bank account next week — don’t worry. It actually is free money.
