The most essential thing to know about stimulus checks: The IRS equationMarch 10, 2021
Many things are factored in when it comes tofor receiving a of up to and . For example, the for the stimulus formula help determine who qualifies for the full payment amount, who and who gets . The main deciding factor, however, is the stimulus formula the IRS will use once the is finalized.
We created athat uses this specific formula, which is based on your and the number of dependents you have, regardless of their age. For the newest proposed stimulus check, the formula has undergone several changes, when compared with the , that could determine .
We’ll explain how the IRS uses its stimulus formula to determine your total check amount and how it can be the difference between your family getting $5,600 or nothing at all. Additionally, here are thetoday, including and what could happen with a . This story is updated regularly.
Stimulus check formula: Important points to remember
Before we dig into changes for a potential third stimulus check, 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 income 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 check targets income way more this time
The recent proposal to “target” the $1,400 stimulus check will 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 less than $75,000 (single taxpayer); $112,500 (head of household); $150,000 (married).
- Disqualified at $80,000 (single); $120,000 (head of household); $160,000 (married).
- Phase-out rate increased to preserve this upper limit.
- These high earners wouldn’t receive partial checks even if they have dependents.
Dependents could add to the total amount of your third stimulus check
With the previous two stimulus checks approved in March 2020 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. For example, say a married couple with an of $200,000 claimed two dependents. Using the previous formula, that family would still get a partial 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.
However, the third check is designed to, which means that it would start by evaluating your AGI and nothing else. 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 receive a large partial payment, as long as they come in below that absolute upper income limit. You canfor an idea of what you’d get.
Phase-out or reduction rate: Why the two are essential, how they work
A sliding scale is involved here. For 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 you reached an income level of $87,000, after which point you’d be ineligible.
For the planned $1,400 stimulus check, things have recently changed: 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 an $80,000 cutoff. You’d receive a partial check for an AGI between $75,000 and $79,900. 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 .
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