Congress has passed a $2.2 trillion coronavirus stimulus package to help Americans affected by the coronavirus pandemic. The bill includes direct cash assistance, additional unemployment funds, and tax credits to employers. Called the CARES Act, the 880-page long legislation represented a rare moment of bipartisanship; it passed unanimously in the Senate.
The most well-known piece of the bill — stimulus checks — is available only to eligible Americans, based on tax returns. If you have already filed your 2019 tax returns, the Internal Revenue Service (IRS) will utilize those. If you haven’t, any coronavirus assistance will be based on your 2018 returns.
If you didn’t file either year because your taxable income is low enough not to necessitate a filing, don’t worry. The IRS will still be able to calculate your benefit; what’s more, Americans on the low end of the income scale will receive the full benefit.
Your eligibility is based on your adjusted gross income or AGI. Your AGI is the total amount of taxable income minus deductions and personal exemptions. Taxable income includes salary, tips, capital gains, and income from dividends or interest. So if you are calculating how much you might receive, don’t forget to include any bonuses or money made from the sale of stocks (among others). Employer payments of student loans for their workers will now be excluded from taxable income.
What are the benefits?
Congress has authorized a maximum of $1,200 for each American, and up to $2,400 for those who file their taxes jointly. Taxpayers with children also receive a flat $500 per child. If you share children with someone but you do not file jointly, the money goes to the person who claims them as a dependent.
What are the eligibility requirements?
To receive the maximum benefit, an individual filer without children must earn $75,000 or less. Joint taxpayers without children can receive the full amount if they earn less than $150,000. Heads of household can earn up to $112,500.
After this, the benefit is reduced.
What if I earn more?
Those who earn more than $75,000 won’t be excluded but the amount of assistance is reduced until an earner hits the cap.
Individual filers without children who earn over $99,000 will no longer be eligible.
Joint filers without children can earn up to $198,000 before they no longer qualify.
What if I have children?
The income threshold to qualify for a stimulus benefit is higher when you have children; and with each child the income threshold raises. For example, married couples with two children, filing jointly, can earn up to $218,000 before they’re no longer eligible for a benefit. Remember, heads of household, or those who file with dependents, can earn up to $112,500 to receive the maximum benefit ($1,200), plus an additional $500 for each child they claim.
What if I earn less this year than I earned previously?
If your previous tax filings make you ineligible but you would be eligible for assistance based on what you earn in 2020, unfortunately you won’t be able receive a stimulus check… immediately. But the funds will be available to you when you file your 2020 taxes. Why’s that? That’s because the money received is a tax credit for the year 2020. If you are eligible for unemployment, the bill will allow for increased unemployment benefits.
How quickly will I get my money?
The answer is… it depends. If you have a bank on file with the IRS to receive your tax refunds via direct deposit, you’ll be able to access the funds in a matter of weeks. Earlier this week, Treasury Secretary Steve Mnuchin said he hoped assistance would be available within “three weeks.”
If you don’t, paper checks will be mailed to you. In the past, rebate checks took over a month to distribute checks to Americans.
Unemployment insurance provisions in the bill are now increased, allowing for an additional $600 a week to each recipient for up to four months.
But how much you will earn on unemployment depends on your state. In New York, for example, the maximum is $504 weekly. With a boost of $600, an unemployed worker could earn $1,104 a week. But if you live in Texas, for example, that number drops to $454 a week, for a maximum of $1,054. In Mississippi, the maximum drops drastically to $235 a week.
Unemployment insurance is also extended to self-employed workers, independent contractors and those with limited work history. The federal government will also step up and fund unemployment benefits after state benefits end, allowing for coverage through the end of the year.
Aid for employers
American workers aren’t the only ones to receive assistance. Employers will be eligible for a 50% refundable payroll tax credit on wages they pay up to $10,000 during the coronavirus crisis. The credit is only available to businesses that were disrupted due to the shutdown and who experienced a 50% reduction in gross sales compared to the same quarter last year.
The credit can be claimed for all employee wages for companies with 100 or fewer workers. It can also be used by companies with over 100 employees if their workers are retained, but aren’t working due to the pandemic.
A boost to income
According to the Tax Foundation analysis, the bill will provide a significant boost to lower-income earners. In general, the increase to taxpayers’ after-tax income would be roughly 2.6%. For workers in the bottom 20% of wage earners, the boost could be as high as 16.33%. For those in the top 20% of wage earners, the boost would shrink to nearly 1.9%.
The Tax Foundation has estimated that almost all workers that fall below the 80% of top earners in the country will receive some sort of payment.
They also estimated that the “average rebate” to American workers would be just over $1,500, ranging from $1,436 for the lowest wage earners to just $45 for the highest.
In total, the Tax Foundation estimates that the government will generate $301 billion less in revenue due to the coronavirus stimulus.
Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.
Republican Attorneys General push forward with lawsuit to dismantle Obamacare despite coronavirus
Coronavirus recession to hit over 24 million workers hardest: study
Coronavirus hits Democratic communities harder than Republican counterparts
Trump’s coronavirus plan to cost over $800 billion, won’t help the poor: study
Look at Amazon, Visa, and other as markets tumble: strategist
Coronavirus to impact low-wage, black workers the most
Read the latest financial and business news from Yahoo Finance