What the Stimulus Package Means for You

Am I Eligible for a Stimulus Check?

The stimulus check payouts are based on your adjusted gross income (AGI) in 2019 (if you have filed your 2019 tax return) or 2018 (if that is the last tax return you’ve filed). AGI is your gross income minus certain deductions like contributions to a traditional IRA or student loan interest. You can find your AGI on line 8b of your 2019 federal Form1040 or line 7 of your 2018 Form 1040. 

Individual taxpayers with an eligible social security number and an AGI of $75,000 or less should be eligible for a $1,200 stimulus check. Married couples filing jointly with an AGI of $150,000 or less should be eligible for a $2,400 stimulus check. Individuals filing as head of household with an AGI of $112,500 should be eligible for $1,200. 

The first step you should take right now is to file your 2019 tax return, if you have not already. And, if you are getting a tax refund, choose to receive that refund through direct deposit. This will ensure that the IRS has the most current tax filing and direct deposit information for you, which they will use to determine individual stimulus check amounts.

Stimulus payments will be paid this year based on information from your most recent tax return and will be reconciled on your tax year 2020 return when you file in 2021 to ensure you received the correct rebate amount. If you are underpaid based on your 2020 income you may receive more credit.  If you are overpaid you don’t have to pay it back.

If you’re currently unable to receive benefits at all because you earned too much in 2019, you may receive a tax credit next year when you file your taxes if your income drops in 2020.

Parents with dependent children 16 or younger will also receive $500 for each qualifying child. These children also aren’t able to receive a check on their own since dependents are not eligible for stimulus payments. That means most college students won’t be eligible for stimulus checks unless their parents don’t claim them as dependents on their taxes.

The stimulus checks start to phase out for single individuals with an AGI between $75,001 and $99,000, and for married couples filing jointly with an AGI between $150,001 and $198,000. 

The stimulus amount decreases by $5 for every $100 you earn above the threshold. If your AGI is $76,000, for example, you’ll get a $1,150 check. You can use TurboTax online calculator to help you estimate if you qualify and how much you can expect.

Even if you owe back taxes or have defaulted on federal student loans, you’ll still get a stimulus check. However, those with unpaid child support will not be eligible for a stimulus check. 

You need an eligible Social Security Number to qualify for a stimulus check, so those with green cards and select types of visas may be eligible.

How Will I Get My Stimulus Check?

For those who have filed their taxes, there is no action needed. The IRS will send your stimulus check to the direct deposit account set up when you filed or will mail a paper check based on the information in your latest filed tax return (2019 or 2018). This is why it’s important to file your 2019 taxes if you haven’t yet so the IRS has the most up to date information.

If you are not required to file a tax return you can use TurboTax free registration tool to easily submit the necessary information to the IRS so they can determine your stimulus payment amount and where to send your stimulus check. Users simply answer a few questions and then choose to receive their payment via direct deposit or check.  

On March 30, the Treasury Department and the Internal Revenue Service announced that the distribution of stimulus payments will begin in the next three weeks. If you did not include direct deposit information on your tax return, a check will be mailed to you based on the address on your tax and that could take several weeks. Checks will start being mailed the week of May 4th and those with a lower income will receive their checks first. 

The IRS has a special link for more information on the stimulus check.

Expanded Unemployment Benefits

For those who have lost their jobs, the unemployment portion of the stimulus package should provide more relief than the one-time stimulus checks. The latest unemployment figures show that more than 6.6 million people applied for unemployment benefits as of April 9, the most in US history.

Those filing for unemployment will receive an extra $600 per week through July 31. This doesn’t include any additional unemployment income they may receive from their state. Refer to your state’s individual unemployment website to file and find out if you qualify. 

One notable change is that self-employed workers will now be eligible for benefits. This includes freelancers, contractors, and gig workers. Normally, workers in this sector aren’t eligible to receive unemployment because they don’t pay into unemployment insurance.

This exception highlights how the American economy has changed since the turn of the millennium. A significant percentage of workers – more than 15% – now make a living driving for Uber, delivering for Postmates or otherwise working in a self-employed capacity.

Student Loan Deferment

The bill also includes a reprieve until September 30, 2020, for borrowers with federal student loans, during which time no interest will accrue. This will be automatically instituted, so borrowers don’t have to sign up. 

The temporary reprieve won’t affect borrowers who are working toward Public Service Loan Forgiveness, and the six month period will count towards the 120-payment requirement for PSLF. Those who are not struggling financially can continue to make payments if they so choose.

Private student loans are not included in this reprieve, as well as government loans made under the now-defunct Federal Family Education Loan (FFEL) program. If you have FFEL loans, you’ll have to apply for deferment or forbearance, during which time interest will still accrue.

To find out if your loans are covered under this program, log onto your student loan account. If it says you have Direct Loans, then your loans will be covered. You can also try to call the loan servicer, but be prepared for long hold times.

Added tips on how to use the stimulus check:

If you are in any kind of financial hardship or income reduction – use the money to pay for your essential expenses or keep the money in cash, for now, if the stimulus payment and unemployment will not be enough, call your lenders or banks directly and try to work out a reasonable payment plan or see if they can defer (with no interest) any of your payments. 

If you need access to additional loans, do your due diligence and find the best option for your situation. Do not hesitate to ask for help, many professionals (including CFP® practitioners) are willing to offer help and guidance for free.

If you currently have a job but are worried about your or a spouse’s job security – Consider stopping any extra debt payments you are making right now and save all extra cash into your emergency fund. You can use any cash you have leftover to make your deferred extra payments when things get back to normal. 

If you have a job and aren’t worried about income fluctuations, you can keep going with business as usual including investing and making extra debt payments but also make sure you have an emergency fund that can cover at least 6 months worth of living expenses. You could also consider helping your family, friends and community with any extra income you may be lucky to donate or lend.

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