One of the provisions of the CARES Act is providing eligible taxpayers with a direct stimulus payment for up to $1,200 per taxpayer ($2,400 if married couple filing a joint return).  In addition, taxpayers may also receive $500 for each child who is age 16 and under. An eligible individual cannot be a nonresident alien, claimed as a dependent on another taxpayer’s return, or an estate of trust.

Generally, a qualified child is:

  • The taxpayer’s son or daughter, stepchild, adopted child, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them who was under age 17 at the end of the tax year, lived with the taxpayer more than half the year
  • Someone who did not provide over half of his or her own support for the year
  • A US citizen, US national, or US resident
  • Claimed as a dependent on the taxpayer’s tax return
  • Someone who has a social security number (or other identification number) that is reported on the tax return

The amount of the stimulus payment is based on the taxpayer’s income.  For single individuals who have adjusted gross income (AGI) of $75,000 or less, they will receive the full amount. Likewise full credit is allowed for AGI less than $112,500 for a head of household, and $150,000 for married couple.

Example 1 Question:  For Married taxpayers with three children ages 12, 14 and 17 with 2019 AGI of $145,000 that was reported on their 2019 timely filed return, what is the amount of the 2020 advance rebate?  

Answer:  $3,400.  Since the taxpayer’s AGI is less than the $150,000 threshold, they are entitled to the full $2,400 rebate for a married couple plus $500 for each qualifying child. Only two of their children qualify due to the age requirement of 16 and under.                       

The amount of the credit is reduced, but not below zero, by 5% of the taxpayer’s AGI that exceeds $$75,000 for singles, $112,500, for heads of household, and $150,000 for married couples.  The credit completely phases out when a taxpayer’s AGI exceeds $99,000 for a single, $146,500 for heads of households, one child, or $198,000 for joint filers no qualifying children.

Example 2 Question:  Same facts as Example 1 above, except the 2019 AGI is $155,000. What is the amount of the 2020 advance rebate? 

Answer:  $3,150. The answer was determined as follows:

Step 1:  Determine the amount of income over the $150,000 MFJ threshold.  $155,000-$150,000 = $5,000.

Step 2:  Multiply $5,000 by 5% which equals $250.

Step 3:  Determine the amount of the credit. ($2,400+$1,000) - $250 = $3,150.

The credit will be determined based on AGI reported on a an already filed 2019 tax return, the 2018 AGI if the 2019 return is not yet filed or information provided by the 2019 form SSA-1099 if a taxpayer has not filed a 2019 or 2018 individual income tax return.

The IRS will be issuing the stimulus payments to qualifying individuals as rapidly as possible.  These payments will be issued electronically to any account to which the payee authorized, on or after January 1, 2018, the delivery of a refund of federal income taxes.  Otherwise checks will be issued and mailed.  In addition, the IRS must mail a notice to the rebate recipient no later than 15 days after the date on which the rebate was distributed indicating the method used to pay the rebate, the amount of the rebate, and a phone number to contact the IRS. 

No advance rebate will be made or allowed after December 31, 2020.