The Economic Impact Payments (often referred to as "stimulus checks") are starting to show up in bank accounts for many people, and there are several questions and concerns that some people have.
Several weeks ago, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which included individual stimulus checks for more than 100 million Americans. Now, the Internal Revenue Service (IRS) has announced 50 to 70 million people should expect their money this week.
Two of the most common questions we have received: will my stimulus money be taxed, and will the amount be taken out of my tax refund next year? The answer to those concerns are not easily found (if they are even available yet in plain-language) on the IRS website , so we checked with other sources to find out.
According to Money.com : , the stimulus payments are not considered taxable income, and are not "advances" on next year's tax refunds:
- Will this eat into my tax refund for 2020? No. The ‘advance’ you’ve been hearing about is in reference to a special tax credit that’ll appear on the tax return you file in 2021 for the 2020 tax year — a tax credit that wouldn’t have been there if it wasn’t for these stimulus checks. So the Internal Revenue Service isn’t giving you some of your 2020 tax refund upfront. The stimulus check will be in addition to what you would’ve otherwise expected.
- Will it count towards my taxable income for 2020? No. This money is not considered income. It won’t be taxable and it won’t affect your income tax bracket for 2020.
CNBC.com offers the same information:
- Myth 1: "The stimulus checks are taxed." The stimulus checks are not taxable income. The checks — which are worth $1,200 for individuals earning up to $75,000 and $2,400 for couples earning up to $150,000, plus $500 for dependents under 17 — are structured as refundable tax credits. That is why even people who do not typically file tax returns qualify for these payments, according to the Tax Foundation , an independent think tank.
- Myth 2: "I will have to pay back the stimulus check next tax season." Assuming all of the information on your tax returns is correct, you will not repay the check next spring.
And from Forbes.com : "The good news about your stimulus check is that’s tax-free. You will not owe income taxes on your stimulus check."
The myth-busting site Snopes.com provides this information:
- Legally the payment is considered a tax credit advanced to the recipient from the (future) 2020 tax return — that is, the return the recipient will file in 2021. This has led some to believe that the payment either needs to be paid back in full in 2020, or that the payment is considered taxable income, or that the payment counts against one’s 2020 tax refund. None of these conclusions, however, is true. That’s because another provision written into the law dictates that recipients of the economic impact payment will be credited as if they had paid the government back. This makes the payment a non-taxable fund that does not affect future returns.
And from TaxSlayer.com :
- Is my stimulus check taxable? No, the stimulus checks are not taxable. However, if your 2020 income is much higher than your 2018 or 2019 income, you may be required to pay back a portion of the stimulus payment next year if your new income is above the threshold. This should be a small number of Americans.
From SmartAsset.com :
- One important thing to note about these stimulus checks is that they do not count towards your taxable income for tax year 2020. In addition, the check is not seen as an advance on your 2020 tax refund, as they are entirely distinct from one another.
CONTINUING COVERAGE
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