Stimulus 3.0: Recovery Rebates
Congress passed a massive bill recently. The official name is the American Rescue Plan of 2021. Most people are calling it Stimulus 3.0. Names aside, it comes in at over 600 pages. Although the bill covers many significant provisions, the most talked about portion has to do with recovery rebates or "stimulus payments".
"Wealth is a crown for the wise; the effort of fools yields only foolishness." Proverbs 14:24
Recovery Rebate Payments
There is a provision in the bill for money going directly to many Americans. Some fine print is included and may affect your household, so understand what I'm sharing is high level.
Also note this is similar to steps congress has passed before, but contains notable differences.
The payments are $1,400 per eligible individual, but keep reading for a high-level overview of how this will work. The IRS will be offering updates as times goes on about implementation of these payments.
Key differences from past recovery rebates
Beyond just the amount, there's important differences regarding eligibility. Some households will be helped by the changes and some will be disadvantaged.
Eligibility in Your Household
Eligibility has been expanded compared to past payments. In the past, only children of a certain age "counted" for purposed of rebates. This time dependents, in the eyes of the IRS, are eligible. This is includes college students who are still counted as dependents on your tax return and any adult (perhaps a relative living with you) who meets the IRS definition of a dependent.
Income (Adjusted Gross Income)
The IRS will use your most recently filed tax return (either 2019 or 2020 taxes) to determine your eligibility for a rebate. The maximum amount you can make and still receive some amount of rebate has been lowered. If your family's adjusted gross income (Married filing jointly) is over $160,000 you will not receive any amount of a rebate.
| Stimulus 2.0 (January 2021) | Stimulus 3.0 (March 2021) | |
| "Full" Payout Per Eligible Individual | $600 | $1,400 |
| Age Cutoff for dependent children to be eligible | Must be under 17 | None |
| College Students who are dependents eligible? | No | Yes |
| Adult dependents eligible? | No | Yes |
| Max Income (Adjusted Gross Income) before amount is reduced or eliminated* | $150,000 | $150,000 |
| Eligible for Direct Deposit | Yes | Yes |
*Example assumes a household files taxes as Married Filing Jointly (MFJ)
You can check AGI on your tax return
Some Payment Scenarios
All examples assume the family files taxes jointly and their income (adjusted gross income or AGI) is below $150,000.
Example 1
A family consisting of Mom, Dad, and two children aged 10 and 12. They will receive $5,600.
Example 2
A family consisting of Mom, Dad, and three children aged 4, 8, and 17. They will receive $5,600. (The 17 year old is ineligible)
Example 3
A family consisting of Mom, Dad, and one child aged 11. They will receive $4,200.
Example 4
A family consisting of Mom, Dad, and five children ages 1,3,5,9, and 13. They will receive $9,800.
Example 5
A family consisting of Mom, Dad, and a child born December 15, 2020. They will receive $4,200. Although, the amount attributable to the baby may be delayed depending on when 2020 taxes were filed.
Example 6
A family consisting of a Mom, Dad, one child aged 5 and grandfather who qualifies under the IRS definition of a dependent living in their home. They will receive $5,600.
Is the Payment Taxed?
No, the payment does not create any tax liability.
Roundup
This post is far from comprehensive. This is a small sample of provisions in this bill. Some of these changes will continue to evolve over time with new information about their implementation and details that will come to light. We'll be monitoring over time for benefits and pitfalls for families like yours.
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