Congress Passes Bill with More "Targeted" Stimulus Payments

picture of government relief program check on top of an American flag

(Image credit: Getty Images)

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.

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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.

Congress Passes $3,000 Child Tax Credit for 2021

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.

2021 Child Tax Credit Calculator

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.

How Your Third Stimulus Check Will Differ From the First Two Payments

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.

Will Your Stimulus Check Increase Your Tax on Social Security Benefits?

Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.