Stimulus check fine print: A new formula could change the amount of your $1,400 paymentMarch 3, 2021
As Congress works to determine how ‘targeted’ a should be, we won’t have an answer until the is approved. The outcome will determine the formula the IRS will use to determine the size of your next payment. (For both the the government used a specific formula to determine the total amount of your stimulus payment size.) Maybe for the full , than that, or .
Once a bill is approved, the IRS will need to rework its calculations, which will define certainand , factors that will certainly prove to be . The , so any details about the check could still change — but the gives us enough details to go on.
Assuming the new check will be approved as is, a family of four could get $5,600, versus the maximum $2,400 they received from the. We’ll explain below how exactly it works. To stay on top of everything stimulus, here are the today, including the and what could happen when and if a . This story is updated regularly.
Stimulus check formula: Important things to know
Before we dig into what may change for a potential third stimulus check and what the outcome would mean for you, here’s how it works. In general,is one of the most important factors in determining your stimulus check total. The other factors include your adjusted gross income, or , and the stimulus check formula. You can still if you’re a too.
The major variables the IRS plugs into the stimulus formula are:
- Your per your .
- Upper limits for single taxpayers, heads of household (for example, a single person with at least one child) and married couples filing jointly.
- The number of you claim.
- “Reduction” or “phase-out” rate — the amount your total would drop for every $1,000 you make above the income limit that allows you to qualify for the full check amount. In other words, the IRS calculates a partial payment if you don’t qualify for the full amount.
How the third stimulus payment targets your income
The recent proposal to “target” the $1,400 stimulus check would keep the highest earners from receiving a partial payment. If the proposal is adopted, the qualifications would be:
- Full $1,400 amount if you earn under $75,000 (single taxpayer); $112,500 (head of household); $150,000 (married).
- Disqualified at $100,000 (single); $150,000 (head of household); $200,000 (married).
- Phase-out rate increased to preserve this upper limit.
- These high earners would not receive partial checks even if they have dependents.
Dependents could increase your check total
With the previous two stimulus checks approved in March as part of the CARES Act and then in December, it was possible to get a partial payment even if you exceeded the maximum income limit — if you had dependents. For example, say a married couple with anof $200,000 claimed two dependents. Using the previous formula, from a $1,400 stimulus payment round that family could still get a $600 check.
That’s because the previous formula begins with the largest amount you’d be eligible to receive (for example, $1,400 per single taxpayer or $2,800 for joint filers) and adds $1,400 for each qualifying dependent. Then it reduces the total possible sum according to your AGI and the phase-out rate.
It’s a little like starting a test with a perfect 100 point score and subtracting a point for every question you miss, rather than starting with zero points and adding them all up at the end of the test.
But in this case, the dependents you name can start you at a higher value, say 110 points in our classroom example. So by the time you subtract “points,” you may still get more than people who don’t have dependents — even if your AGI is above the maximum cap. The more child dependents you have, the higher your starting value and the higher your ending value, too.
The proposal to target stimulus checks would set a firm cutoff, which means that it would start by evaluating your AGI. If you’re over the limit, it wouldn’t matter how many dependents you have. You still wouldn’t be eligible for a check.
On the other hand, a family with a large number of dependents and an AGI within the boundaries could still potentially receive a large partial payment, as long as they come in below that absolute upper income limit. You can.
Phase-out and reduction rate: Why the two matter and how they work
A sliding scale is involved here. With the second check, for example, if yourwas less than $75,000 as a single taxpayer (that means no kids), you should have received the entire . If you made more than that, the size of your check would diminish until $87,000, after which point you’d be ineligible.
For the planned $1,400 stimulus check — though this could still change — you might receive the full $1,400 amount if you earn under $75,000 a year (your AGI as a single taxpayer), with diminishing returns up until a $100,000 cutoff. You’d receive a partial check for an AGI between $75,000 and $99,900. Again, you can see the differences in our.
For heads of households and married couples with dependents, these other household members are an important part of the equation — up to a point (see above).
For more information, here are the top things to. And see how , and people who could also qualify, including families with .