When Congress passed the CARES Act (Coronavirus Relief, Aid, and Economic Security), it signaled a landmark piece of legislation that provides over $2 trillion in aid in response to COVID-19. The CARES Act allows businesses and individuals to receive stimulus in the forms of tax incentives, credits, deductions, and recovery rebates.
What is a Recovery Rebate?
Recovery Rebates – also referred to as stimulus checks – are economic impact payments. Most taxpayers qualify, and they don’t have to take additional steps to receive the payment. Recovery rebates are intended to stimulate the economy through the form of direct payments.
While recovery rebates are technically a 2020 tax credit, they’re being distributed as an advance payment and are non-taxable income. The government started issuing rebates in late April and are expected to continue into early May. Within the first three weeks of the program’s rollout, over $158 billion in recovery rebates have been issued.
Who Qualifies for Recovery Rebates?
The Recovery Rebate is intended for individuals and families, unlike the Paycheck Protection Program which is for small businesses. Individuals filing income taxes can receive up to $1,200, and couples filing jointly are eligible for up to $2,400 and $500 per child.
The recovery rebates are intended to reach the majority of taxpayers. Single taxpayers with an Adjusted Gross Income (AGI) of less than $75,000 qualify for the full $1,200 rebate. Couples filing jointly will receive the full $2,400 rebate if their combined AGI is less than $150,000. Individuals filing as head of household qualify if they have an AGI of less than $112,500.
There’s no cap on the number of children a taxpayer can claim. However, for divorced parents, only the parent who claims the children can receive the $500 credit per child. While the Rebate is limited to one per household, there is no age limit on who can receive it. For those whose sole source of income is Social Security, the government will look back to their 1099 Social Security statement to issue their Rebate.
How Much is the Recovery Rebate?
The recovery rebate is based on your AGI from your most recent tax filing. If you haven’t filed your 2019 taxes yet, your Rebate will be based on your 2018 tax filing. Thanks to the extended tax filing deadline, Americans have until July 15th to file their 2019 federal taxes and many states have also extended the state income tax filing deadlines. For some, it may make sense to take advantage of the tax filing extension and wait to file 2019 taxes. This applies especially to those who made more in 2019 than 2018 to maximize your rebate amount.
The rebate phases out at 5% per dollar of qualified income (or $50 per $1,000 earned) and phases out completely at $99,000 for single taxpayers with no kids. For joint taxpayers without kids, the rebate phases out at $198,000. Most filers below the 80th percentile are eligible for the Rebate, while 0.1% above the 99th percentile are eligible for the Rebate due to the phaseout levels.
How Do I Get a Recovery Rebate?
For taxpayers who filed taxes in either 2018 or 2019, you’re automatically eligible for the Recovery Rebate.
For taxpayers who have previously used direct deposit to receive a tax refund, the government will issue their recovery rebate via direct deposit to the same bank account. The government began sending direct deposits mid-April, so many Americans have already received their Rebate through this method.
Taxpayers who haven’t used direct deposit in the past for a tax refund will receive a check in the mail.
To check the status of your payment, submit your direct deposit information, or simply check if you’re eligible, visit Get My Payment on the IRS website. You may need your last tax return to verify your eligibility.
Can I Expect More Than One Check?
As of right now, the Recovery Rebate is limited to a one-time payment. However, some lawmakers are proposing additional stimulus aid and even monthly payments. Congress may approve a second round of stimulus checks, but as of now, there’s no guarantee.
There’s precedent for sending out a second wave of economic aid. In 2008, Congress passed the Economic Stimulus Act, which provided rebates to over 124 million households. The American Recovery and Reinvestment Act of 2009 provided a mix of additional payments, tax credits, and cuts.
What to Expect from the CARES Act Moving Forward
While millions of Americans have received a recovery rebate, the government is still pushing forward to ensure that all eligible taxpayers receive theirs. According to the IRS: Social Security, survivor, and disability non-filers can expect to see their payments by May 5th.
The CARES Act has rapidly progressed since its introduction earlier this year. Follow our COVID-19 updates to stay up to date on the latest changes.