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The Impact of Stimulus Payments on Your Taxes

What you'll learn: What to do about stimulus payments during tax time

EXPECTED READ TIME:3 MINUTES

What a year 2020 was — New Year’s celebrations were barely over when the coronavirus turned things upside down. But one brighter spot for 159 million Americans was the Economic Impact Payment that appeared in their mailboxes or checking accounts. 

If you didn’t receive a payment, you may be wondering, why? And if you did, you may be wondering, what’s the catch? Let’s put your mind at ease and tackle your questions, one by one.

Do you owe tax on the stimulus money you received? 

That’s an easy one: No. The stimulus payment was designed to impact the economy, not your taxes, so it won’t reduce your 2020 refund or increase your tax due. 

You didn’t get a payment — why? 

If your income for 2019 or 2018 was over $75,000 ($150,000 if you filed jointly; $112,500 if you were head of household), then your payment was reduced by $5 for every excess $100 you earned. And if you didn’t file a tax return for either year, you may not have gotten a payment. But don’t despair, you still potentially may be entitled to payment.

Really? What can you do, then? 

If you were supposed to file a 2019 tax return and didn’t, file right away. If your income was too low to file, go to irs.gov for more information. If the IRS determines you are eligible for a payment, they’ll send it to you. 

What if your income has gone down? 

If your 2019 income was too high for you to receive a payment, but your income in 2020 was much lower, you may be in luck. You can claim your stimulus payment on your 2020 income tax return, and it could increase the refund you receive (or reduce any tax due).

Your 2020 income was higher than in 2019 — will the government want your money back? 

No. If you received a stimulus payment based on lower income in 2019, it’s yours to keep, even if your income increased above the threshold in 2020. 

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The information in this article is for general educational purposes only and not intended to provide specific advice or recommendations. Please discuss your particular circumstances with an appropriate professional before taking action.

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