Facing pressure from moderate Senate Democrats, President Joe Biden has agreed to narrow eligibility limits for a third round of $1,400 stimulus checks. This means that the new Senate proposal could exclude individual taxpayers earning over $80,000 and joint filers making over $160,000 from getting a stimulus payment. Let’s break down what the American Rescue Plan could mean for you – who is eligible for the third stimulus check, how it will be calculated, and how soon you will get it. (Note: This is a developing story, and we will continue to update the article as more information becomes available.)
If you do not have to spend your stimulus check on immediate needs, consider working with a financial advisor to strategize how best to use or invest this money.
How Soon Could You Get the Third Stimulus Check?
Senate Majority Leader Chuck Schumer (D-NY) vowed in a letter to the Democratic Caucus on February 19 that the chamber of Congress will pass the American Rescue Plan by March 14, when unemployment insurance benefits are set to expire.
“We have already incorporated many of your suggestions, as well as a number of bipartisan proposals, into the bill and the Senate is on track to send a robust $1.9 trillion package to the president’s desk before the March 14 expiration of Unemployment Insurance benefits. We will meet this deadline,” he wrote in the letter.
House Democrats already passed the $1.9 trillion American Rescue Plan largely along party lines with a 219-212 vote on February 27 at 2:01 am. Representatives Jared Golden (D-ME) and Kurt Schrader (D-OR) voted against the bill. The party has a 10-seat advantage, but only needed a simple majority to get legislation approved through the budget reconciliation process.
Now, the bill has moved to the Senate, where Democrats will face greater opposition from Republicans in a chamber that is evenly divided 50-50 between both parties.
In an effort to secure the vote of moderate Senate Democrats, President Biden has agreed to lower income level requirements for third stimulus checks, capping payments for individual taxpayers at $80,000 and joint tax filers at $160,000. The approved House plan excludes individual taxpayers earning over $100,000 and joint filers making over $200,000.
Senate Democrats are again expected to use the budget reconciliation process to pass the bill with a simple majority. In this case, Vice President Harris could cast another tie-breaking vote in favor of President Biden’s relief plan.
The budget reconciliation process was already supported unanimously by Senate Democrats on February 2. This opened up a path to pass legislation for a third stimulus payment with just 51 votes.
Opposing Senators were expected to filibuster (delay or block) legislative action for a third stimulus check bill. This means that all bills subject to filibuster require three-fifths (or 60 out of 100 Senators) to close the debate.
If President Biden’s American Rescue Plan had followed this legislation process, it would have needed bipartisan support from Congress — 10 Republican Senators in addition to all 50 Democrats in the chamber, and a majority vote in the House of Representatives — to get approved into law.
The budget reconciliation process prevents a bill from being filibustered and allows it to get passed with a simple majority. President Biden’s relief proposal was approved on February 2 in a budget plan with the support of all 50 Democrats in the Senate and Vice President Harris’s tie-breaking vote.
As soon as the bill gets signed into law, the Treasury Department will start distributing the third stimulus checks within one week or two. For reference, the $600 second stimulus checks started going out to taxpayers on December 29, 2020, two days after President Trump signed the $900 billion COVID-19 stimulus package into law.
For more information on how third stimulus payments will be sent out, read our section about IRS delivery methods and tracking below.
How Much Will the Third Stimulus Check Pay?
President Biden’s $1.9 trillion coronavirus relief bill includes a third round of $1,400 stimulus payments, topping off the $600 checks that were already approved by Congress in December 2020, and adding up to $2,000 for millions of Americans.
House Democrats passed a coronavirus relief bill that proposes stimulus payments for individual taxpayers earning up to $75,000 and joint filers making up to $150,000. But whereas the first and second rounds of stimulus payments phased out checks on a sliding scale of $5 for every $100 over the income limit, the new plan cuts off high earners at $100,000 for individuals and $200,000 for couples.
Now, President Biden has agreed to narrow eligibility limits for a new Senate proposal that could exclude individual taxpayers earning over $80,000 and joint filers making over $160,000.
At the present, the bill for the third stimulus check says that eligibility will be based on your tax filing status.
For more information on who qualifies for a third stimulus check, our tables below will help you calculate different payment options.
How Will the Third Stimulus Check Be Calculated?
The House Democrat stimulus bill mandates the treasury to rely on 2019 and 2020 tax returns to calculate how much you could get for the third round of stimulus checks.
Congress will approve limits based on adjusted gross income (AGI) ranges. This means that taxpayers making less than the minimum threshold could get the full stimulus check, while those earning above it will get reduced payments until they are fully phased out at higher incomes.
You can find your AGI on IRS form 1040. This is calculated by subtracting deductions like student loan interest, health savings account payments, and contributions to a traditional IRA from your gross income.
Your 2019 taxes had to be filed by July 15, 2020. And your 2020 taxes will be due by April 15, 2021. You can read more about when to file your tax returns for the third stimulus check, and other IRS requirements in two tax sections below.
Who Qualifies for the Third Stimulus Check?
Millions of Americans who were eligible for the $600 second stimulus checks could qualify for the third round of stimulus payments up to $1,400. However, many high-earning taxpayers who were eligible for previous stimulus checks will now be excluded. Note that the approved House plan completely phases out individuals earning over $100,000 and couples making over $200,000. And the Senate is looking to lower income eligibility even further, excluding individuals earning over $80,000 and couples making over $160,000.
For reference, the House plan uses the following AGI ranges to determine eligibility for the third round of stimulus checks:
- Singles phase out at AGIs between $75,000 and $100,000.
- Heads of household phase out at AGIs between $112,500 and 150,000.
- Couples phase out at AGIs between $150,000 and $200,000.
The new Senate plan could narrow income ranges to:
- Singles phase out at AGIs between $75,000 and $80,000.
- Heads of household phase out at AGIs between $112,500 and 120,000.
- Couples phase out at AGIs between $150,000 and $160,000.
Keep in mind that this is different from the sliding scale that was used to determine eligibility for previous stimulus payments. The IRS reduced second stimulus checks by 5% for the total amount made over the AGI limit. This means that payments went down by $5 for every $100 over the limit.
The table below breaks down third stimulus payments based on the narrower income ranges being considered by Senate Democrats for singles and joint tax filers:
|Senate $1,400 Stimulus Checks With Narrower Income Ranges|
|Single AGI||Payment||Joint AGI||Payment|
|$80,000 and up||$0||$160,000 and up||$0|
For a comparison, let’s take a look at the third round of $1,400 stimulus checks with the wider income ranges from the approved House plan:
|House Plan $1,400 Stimulus Checks With Targeted Income Limits|
|Single AGI||Payment||Joint AGI||Payment|
|$100,000 and up||$0||$200,000 and up||$0|
And for wider context, let’s compare what the third round of $1,400 stimulus checks would look like for singles and joint filers without the targeted income ranges:
|$1,400 Stimulus Checks Without Targeted Income Limits|
|Single AGI||Payment||Joint AGI||Payment|
|$103,000 and up||$0||$206,000 and up||$0|
Following this calculation, individual taxpayers making up to $103,000, and joint filers earning up to $206,000 could still get an additional stimulus check. Note that the table breaks down payments with the 5% sliding scale (for every $100 over the limit taxpayers lose $5).
Now, let’s take a look at how much the second stimulus checks paid out for single and joint filers in December 2020. Note that single filers making over $87,000 and joint filers making over $174,000 did not qualify for a second stimulus payment:
|Second Stimulus Checks for Single and Joint Filers|
|Single AGI||Payment||Joint AGI||Payment|
|$87,000 and up||$0||$174,000 and up||$0|
Will Eligibility Requirements Change for Dependents?
The House Democrat bill expands eligibility to adult dependents, including college students and disabled adults. A summary of the bill says: “For purposes of this credit, a dependent includes both children and non-child dependents. A taxpayer is eligible for a credit with respect to any individual in the household for whom a Social Security number is associated with such individual on the tax return.”
The House had similarly removed the age requirement for adult dependents in the CASH Act, changing the definition of eligible dependents from “qualifying children (within the meaning of section 24(c))” to “dependents (as defined in section 152)”. Under this section, the term “dependent” means “qualifying child” or “qualifying relative.”
While the House Democrat bill pays out $1,400 for each qualifying dependent, families should keep in mind that the targeted lower income ranges will exclude them if they earn over $200,000. Note that if the Senate approves a narrower income range, payments for joint filers could be capped at $160,000.
For reference, the second stimulus checks currently provide additional $600 payments for qualifying dependents under the age of 17. So a couple filing jointly with three eligible children could get a maximum second payment of $3,000 ($1,200 for married joint filers with an AGI under $150,000, and $600 for each additional qualifying dependent).
But even though there is no limit on the number of dependents that you can claim for the second stimulus check, you cannot get the extra $600 for children and adult dependents over the age limit, and they do not qualify for a stimulus check of their own either.
If the new stimulus plan gets approved without any changes by the Senate, then both joint filers and heads of household will get an additional $1,400 payment for each dependent, regardless of age.
The table below breaks down third stimulus checks with narrower income ranges that the Senate is considering for heads of household with one dependent:
|Senate Stimulus Checks for Heads of Household & 1 Dependent|
|$120,000 and up||$0|
Now, let’s break down third stimulus checks with the targeted income ranges approved by the House plan for heads of household with one dependent:
|House Plan Checks for Heads of Household & 1 Dependent|
|$150,000 and up||$0|
In this case, heads of household with one dependent are completely phased out at incomes over $150,000.
And for another comparison, let’s take a look at the second $600 stimulus check and a $1,400 third payment without targeted income limits:
|Second Stimulus vs Biden’s $1,400: Heads of Household & 1 Dependent|
|AGI Level||$600 Second Stimulus Check||AGI Level||Biden’s $1,400 Stimulus Check|
|$146,500 and up||$0||$168,500 and up||$0|
This breakdown shows that heads of household earning up to $146,500 still qualify for a second stimulus check with an additional payment for one dependent. And heads of household making up to $168,500 could get another stimulus check with an additional payment for one dependent.
Can Mixed-Status Families Still Get Stimulus Checks?
The House plan says that joint returns maintain eligibility for mixed-status households, which include family members with different citizenship or immigration statuses. A common example of a mixed-status family can be made up of undocumented parents and U.S.-born children.
If the Senate approves eligibility requirements from the House plan, qualifying couples could get a maximum stimulus payment of $2,800. However, joint returns for mixed-status families with only one valid identification number (this is defined as the Social Security number that is used when filing taxes) will only get up to $1,400, and joint returns without valid identification numbers for either spouse will be excluded.
The table below calculates payments for mixed-status families with one undocumented partner, using narrower income ranges being reviewed by the Senate and the approved ranges from the House plan:
|$1,400 Check for Mixed-Status Families With 1 Undocumented Partner|
|Senate AGI||Payment||House AGI||Payment|
|$160,000 and up||$0||$200,000 and up||$0|
Because of the targeted income limits, mixed-status families earning over $160,000 with the narrower Senate ranges and $200,000 under the approved House plan do not qualify for a third stimulus check.
For a comparison, if a U.S. citizen and a noncitizen spouse filed their taxes jointly under the March 2020 CARES Act, they were not eligible to claim the first stimulus check. However, when the $900 billion COVID-19 relief package was signed into law in December 2020, joint filers with one undocumented spouse became eligible for the second stimulus check, as well as additional payments for child dependents.
You should note that “nonresident aliens” are not eligible for the House Democrat bill. They were also excluded from the first and second stimulus checks. Currently, the IRS says that “qualifying resident aliens” with valid Social Security numbers for employment are eligible for stimulus payments as long as they have not been claimed by another taxpayer as a dependent.
How Could Third Stimulus Checks Be Sent and Tracked?
The IRS will make payments via direct deposit, paper check and prepaid debit cards.
For a comparison, direct deposits for second stimulus checks started going out on December 29, 2020. Paper checks followed one day later, and the IRS said that it sent out approximately 8 million prepaid debit cards loaded with stimulus payments.
The IRS was mandated by Congress to deliver the $600 stimulus checks by January 15. Eligible taxpayers who did not get payment by the cutoff date, will have to claim their stimulus as a recovery rebate credit on their 2020 tax return, which is due by April 15.
Note that eight million eligible recipients may not have yet received their first or second stimulus checks. President Biden signed an executive order on January 22, asking the Treasury Department to deliver direct payments to all qualifying recipients.
You will be able to follow up on the status of all your stimulus payments on the IRS’s “Get My Payment” portal.
Keep in mind that if you collect Social Security retirement benefits, Social Security survivor benefits, Social Security disability benefits, Supplemental Security Income (SSI), Railroad Retirement benefits and VA benefits, you could automatically get a possible third stimulus check via direct deposit as long as you have your bank account on file with the IRS.
The agency also mailed out letters (Notice 1444-A and Notice 1444-B) to eligible recipients for the first two rounds of stimulus checks, breaking down the amounts of the payments, how they were delivered and how to report them if they were not received.
Will the IRS Tax My Third Stimulus Check?
The IRS did not consider either of the first two stimulus checks to be taxable income. The agency says that because stimulus payments are “not includible in your gross income,” you will not have to report them on your federal income tax return, or pay income taxes on either check.
You should also note, that if you owe taxes, you could still qualify to get a stimulus payment because the IRS will not use it to offset federal or state tax debts like it normally does with tax refunds.
The 2020 COVID-Related Tax Relief Act says: “The Advance payments are generally not subject to administrative offset for past due federal or state debts. In addition, the payments are protected from bank garnishment or levy by private creditors or debt collectors.”
For the third round of stimulus checks, the House proposal includes an exception from reduction or offset rules that are applied to collecting money owed on federal and state taxes, child support and other debts. However, you should keep in mind that the IRS intercepted or reduced payment from the first round of stimulus checks to pay for past-due child support.
Qualifying taxpayers who did not get the full amounts of their stimulus payments could claim a recovery rebate credit to increase their tax refund or lower their tax bill.
As an example, if you have to pay $1,600 in taxes this year, and the government still owes you the maximum stimulus payment of $1,800 (that’s $1,200 + $600 for the first and second checks), then you can use your recovery rebate credit to offset your tax bill and get a $200 tax refund.
But, on the other hand, if you’re expecting to get back money from your tax return, then your tax refund could be significantly higher depending on how much you are owed from your stimulus checks.
When Should I File Taxes for the Third Stimulus Check?
If your income fell in the 2020 tax year, you may want to file your tax return earlier to qualify for a third stimulus check.
The House Democrat bill targets lower income ranges to exclude higher-earning taxpayers from getting a payment.
Filing at the beginning of the tax season with a lower income may help you qualify for a bigger check.
However, if your income went up in tax year 2020, then you may want to delay filing so that eligibility is determined by your lower 2019 income.
You may also want to file early if the size of your family increased in 2020. The House Committee bill includes a child tax credit that pays up to $3,600 for each qualifying child under 6 years old, and $3,000 for every child between ages 6 and 17.
This means that if you became a parent during the tax year, you could get an additional payment by claiming your child as a dependent earlier.
With the pandemic, many Americans are looking towards their tax refunds to get an extra boost for their finances.
The IRS says that the average tax refund in 2020 was more than $2,500, and it expects over 150 million tax returns to be filed in 2021.
The 2021 tax season began on February 12. You will need to file your 2020 taxes by April 15. Taxpayers filing online and claiming the earned income tax credit (EITC) or the additional child tax credit (ACTC) could get their refund via direct deposit by the first week of March.
You can use SmartAsset’s tax return calculator to figure out your 2021 tax refund or tax bill.
How Are Americans Using Stimulus Checks?
The U.S. Census Bureau said in a 2020 study that the majority of recipients who got the first stimulus check spent their payment on household expenses. Adults with incomes between $75,000 and $99,999 told the Census that they would most likely pay off debt or add to their savings. While adults making less than $25,000 said they would use their stimulus to pay for expenses.
For those households that spent their first stimulus checks, the study says that:
- 80% used it on food
- 77.9% used it on rent, mortgage and/or utilities (these include gas, electricity, cable, internet and cellphone)
- 58.2% used it on household supplies and personal care products
- 20.5% used it on clothing
- 8.1% used it on household goods (these include TVs, electronics, furniture, appliances and recreational goods like fitness equipment, toys and games)
The U.S. Bureau of Labor Statistics similarly found that the majority of recipients spent their first stimulus check on essential needs, including food (66%), utilities and internet/phone (50%), household supplies and personal care (47%) and rent (28%). Only 25% of recipients said they would use their first stimulus check to pay down debt and 16% said they would use it to add to their savings or invest.
Another study pointed out that recipients are less likely to spend their stimulus checks on the economy. The Federal Reserve Bank of New York said that only 29% of households surveyed spent their first stimulus checks by June 2020, while 36% saved them, and 35% paid down debt. This trend could indicate that recipients of second and third stimulus checks may be even more inclined to save the money and pay down debt.
For additional context, the Bureau of Economic Analysis said that consumer spending had increased $737.7 billion (5.6%) in June 2020. But by December 2020, it had decreased $27.9 billion (0.2%). For a comparison, personal saving was $3.37 trillion in June and the personal saving rate was 19%. But by December, personal saving had gone down to$2.38 trillion and the rate was 13.7%. January 2021, however, showed a $340.9 billion (2.4%) increase in consumer spending, and personal saving also went up to $3.93 trillion with a 20.5% personal saving rate.
House Democrats passed President Biden’s $1.9 trillion relief package with a third round of $1,400 stimulus checks, topping off the $600 second stimulus payments and adding up to $2,000 for millions of Americans. Targeted income limits, however, exclude individual taxpayers earning over $100,000 and joint filers making over $200,000. The bill has now moved to the Senate where it must be submitted to another vote. Both chambers of Congress have to pass the bill before it can get signed into law.
It’s important to keep up with the latest developments so you can know what type of aid you could qualify for. We will continue to update this article as soon as new information becomes available. You can also find other relief programs at the federal government help center and our list of coronavirus relief programs by state.
Tips for Individuals During the Coronavirus Pandemic
- If you don’t need to use your stimulus check for anything urgent, consider investing or saving the money. A financial advisor can help you get started if you need help managing your money or investments. SmartAsset’s free tool can match you with financial advisors in your area in just five minutes. Get started now.
- If you are struggling to keep up with loan or credit card payments, you can take steps to protect your credit score and speak with your bank directly to see whether you can defer loan payments or waive certain fees.
- If you can afford it, investing in index funds during a recession is a safe option. But if you’re looking for a slightly more aggressive approach, check out some free investment classes to learn more.
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