Who's ready for a bit of good news? 🙋♀️ You might have some extra money coming your way from the government this spring.
Congress has passed a plan to help get cash into the hands of Americans reeling from the economic fallout caused by the Coronavirus pandemic.
Now you've got my attention. Tell me more.
The COVID-19 economic relief package is the largest economic rescue in American history. Around $2 trillion will be injected into the heart of the economy, in the form of direct payments to families, individuals and businesses from the federal government. Yes, trillion, with a 't'. That’s about half of what the entire U.S. government budget was last year.
So, who qualifies for receive funds? How much is being sent? When can you expect payment and how will you get it? You’ve got questions, we’ve got the answers.
Who qualifies for payment?
The payments go to almost any adult with a Social Security number, as long as they aren’t dependents of someone else. Those adults get payments for the children in their household.
It’s expected that about 90% of all Americans will get direct financial assistance. The people who won’t are those with higher incomes.
How much will I get?
Individuals earning up to $75,000 a year will be eligible for the full $1,200 check. Reduced checks will go out to individuals making up to $99,000 a year (the payment amount falls by $5 for every $100 in income above $75,000).
Married couples are eligible for a $2,400 check as long as their adjusted gross income is under $150,000 a year. Reduced checks, on a sliding scale, will go out to married couples who earn up to $198,000. Married couples also will receive an additional $500 for every child under 17.
People who file as a “head of household” (typically single parents with children) are eligible for a $1,200 check if they earn up to $112,500 a year. Reduced checks on a sliding scale are available for heads of households earning up to $136,500 annually. Heads of households will also receive an additional $500 per child under 17.
The stimulus package includes more than $370 billion in government-backed bank loans that, in some cases, borrowers won’t have to repay.
Want to know how much you’ll get? The Washington Post has a calculator that will tell you.
What tax year will my check amount be based on?
Payments will be based on your 2019 income, but you can also use your 2018 return if you haven’t filed yet. If your income last year makes you ineligible, but you expect a drastic loss of income this year because of the coronavirus, filing for unemployment may be the best option for you.
When can I expect my payment?
The exact date is unclear as the bill still needs to be passed by the house and signed into law by the president. However, taxpayers can expect payment in less than a month after that.
How will I get the money?
Payments are expected to be issued by the IRS through direct deposits. Those who do not have direct deposits set up with the IRS will receive a check from the government in the mail, and who doesn’t love getting mail, especially when it's money!
What about unemployment insurance?
The bill includes a proposed increase in unemployment insurance. It will increase the maximum state unemployment benefit by $600 per week for up to four months. It also extends the benefit to those who do not typically qualify, such as gig economy workers, furloughed employees, and freelancers, who will for the first time be eligible for unemployment benefits.
So, who doesn’t get a check
Those not eligible for payment include high-income earners without children. For example, an individual who earns more than $99,000, or a married couple earning more than $198,000 (with no kids as dependents) will not receive funds.
What should you do with your money?
Well, that's not up to us, that's up to you! But, here are a few things we think you should consider:
1. Spend it on the essentials
Those who have already lost a lot of income or are fearful of a layoff on the horizon should spend the money on basics such as rent, groceries, prescriptions, gas, and utilities. If unemployment isn't a concern, number two might be the best option for you.
2. Fund an emergency savings account
We talk about the importance of a well-funded emergency savings account here. But, the Cliff'sNotes version is even small amounts of cushion can help people stave off disaster. As little as $250 can significantly reduce the risk that a family will miss paying a utility bill or be evicted, research suggests.
3. Pay high-interest credit-card debt off
According to WalletHub™, the average American household has over $8,000 in credit card debt. Add not receiving a paycheck to the mix, and you've got a recipe for disaster. Try to pay your credit-card bill as soon as it's due, and make sure you stick to a credit card budget. (Yes, it's possible. We tell you how here.)
Oh, and an added bonus: The checks aren’t taxable.