Coronavirus and Your Money

Congress Passes Bill with More "Targeted" Stimulus Payments

Congress finally passes the $1.9 trillion COVID-relief bill. But fewer people will get a third stimulus check under the final bill than under the original version.

We're inching closer to a third stimulus check. After some unexpected delays, Congress finally passed the bill containing President Biden's $1.9 trillion stimulus package on Wednesday afternoon. The bill will now be sent to the White House, where President Biden is expected to sign the legislation on Friday.

However, the stimulus check plan in the original version of the bill is different than what's found in the final bill. While in the Senate, a more aggressive stimulus check "phase-out" (i.e., reduction) rate was added. The new rate made the stimulus check provisions more "targeted" to people who need assistance the most. As a result, according to the Institute on Taxation and Economic Policy, nearly 12 million American adults who would have received a partial third stimulus check under the original bill won't get any payment under the final bill.

[Stay on top of all the new stimulus bill developments – Sign up for the Kiplinger Today E-Newsletter. It's FREE!]

Who's Shut Out in the Final Bill?

People who file their tax return using the "single" filing status with an adjusted gross income (AGI) between $80,000 and $100,000; "head-of-household" filers with an AGI between $120,000 and $150,000; and married couples filing a "joint" return with an AGI between $160,000 and $200,000 won't get a third stimulus check. These people would have gotten a reduced payment under the original bill, but they won't get any money under the final bill sent to the president.

Under both versions of the bill, singles with an AGI above $100,000, head-of-household filers with an AGI exceeding $150,000, and joint filers with an AGI over $200,000 wouldn't receive any third-round stimulus payments. For more on who will or won't get a third stimulus check under the final bill, see Who Won't Get a Third Stimulus Check Under the New Senate Plan?

To calculate the amount of YOUR third stimulus check (based on the final bill), use our handy Third Stimulus Check Calculator. All you have to do is answer three easy questions to get an estimated payment amount.

$1,400 for Dependents

In addition to the $1,400 base amount for all eligible Americans, the final bill calls for an additional payment for each dependent in your family. Unlike the first two stimulus payments, all dependents – regardless of their age – will qualify for the extra payment under this legislation. For first- and second-round stimulus checks, only dependent children 16 years old or younger qualified for the add-on. That meant no extra payments for your older children, including college students age 23 or younger, or elderly parents living with you. That won't be the case for your third stimulus check.

Payments Based on 2019 or 2020 Tax Return

The amount of your third stimulus check will be based on either your 2019 or 2020 return. If your 2020 tax return isn't filed and processed by the time the IRS is ready to send your third stimulus payment, the tax agency will use information from your 2019 tax return. If your 2020 tax return is already filed and processed when the IRS starts to process your payment, then your stimulus check will be based on information found on that return. If your 2020 return is filed and/or processed after the IRS sends you a stimulus check, but before July 15, 2021 (or September 1 if the April 15 filing deadline is pushed back), a second payment will be sent to you for the difference between what your payment should have been if based on your 2020 return and the payment actually sent based on your 2019 return.

If you haven't already filed your 2020 tax return, this will create some opportunities to "game" the system and increase the amount of your third stimulus check. For instance, if you'll get a larger check based on your 2020 tax return, than you might want to quickly file your 2020 return electronically and have your third stimulus check based on that return. If you'll get a bigger check if it's based on your 2019 return, then just wait until after your payment is sent to file your 2020 return. For more on this, see How Filing Your Tax Return Early (or Late) Could Boost Your Third Stimulus Check.

Stimulus Checks Won't Be Taxed

As with the first- and second-round payments, you won't have to pay tax on your third stimulus check. Stimulus checks will actually be advance payments of the recovery rebate tax credit for the 2021 tax year. As such, they aren't included in taxable income.

You also won't have to repay any stimulus payments when you file your 2021 tax return. That's true even if your third stimulus check is greater than your 2021 credit. If your third stimulus check is less than your 2021 credit, you can claim the difference as a recovery rebate credit when you file your 2021 return next year.

For more information about the final stimulus check plan – such as eligibility requirements, garnishment of payments, checks for dead people, and methods of payment – see The Current Plan for a $1,400 Third Stimulus Check.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022

Recommended

Final Estimated Tax Payment For 2021 Is Due This Week
tax deadline

Final Estimated Tax Payment For 2021 Is Due This Week

The deadline for submitting your fourth and final estimated tax payment for 2021 is just days away, so get your payments in now.
January 16, 2022
What Are the Capital Gains Tax Rates for 2021 vs. 2022?
capital gains tax

What Are the Capital Gains Tax Rates for 2021 vs. 2022?

Which tax rate applies to your long-term capital gains depends on your taxable income. Rates for short-term capital gains are higher.
January 14, 2022
What's the Standard Deduction for 2021 vs. 2022?
Tax Breaks

What's the Standard Deduction for 2021 vs. 2022?

If you're like most Americans, taking the standard deduction on your tax return is better than claiming itemized deductions.
January 14, 2022
Will Monthly Child Tax Credit Payments Be Renewed in 2022?
Tax Breaks

Will Monthly Child Tax Credit Payments Be Renewed in 2022?

There will be more child tax credit payments this year if the Build Back Better Act is signed into law. But will the bill get through Congress?
January 14, 2022