Many things are factored in when it comes to your eligibility for receiving a third stimulus check of up to $1400 per adult and dependent. For example, the income limits for the stimulus formula help determine who qualifies for the full payment amount, who gets a smaller portion and who gets no check at all. The main deciding factor, however, is the stimulus formula the IRS will use once the $1.9 trillion stimulus relief bill is finalized.
Here is how the IRS uses its stimulus formula to determine your total check amount and how it can be the difference between your family getting $5,600 or nothing at all.
The major variables the IRS plugs into the stimulus formula are:
- Your AGI or adjusted gross income per your 2019 or 2020 federal tax returns.
- Upper income limits for single taxpayers, heads of household (for example, a single person with at least one child) and married couples filing jointly.
- The number of eligible dependents you claim.
- Reduction or “phase-out” rate- the amount your total would drop for every $1,000 you make above the income limit that allows you to qualify for the full check amount. In other words, the IRS calculates a partial payment if you don’t qualify for the full amount
The recent proposal to “target” the $1,400 stimulus check will keep the highest earners from receiving a partial payment. If the proposal is adopted, the qualifications would be:
- Full $1,400 amount if you earn less than $75,000 (single taxpayer); $112,500 (head of household); $150,000 (married).
- Disqualified at $80,000 (single); $120,000 (head of household); $160,000 (married).
- Phase-out rate increased to preserve this upper limit.
- These high earners wouldn’t receive partial checks even if they have dependents.
With the previous two stimulus checks approved in March 2020 as part of the CARES Act and then in December, it was possible to get a partial payment even if you exceeded the maximum income limit — if you had dependents. For example, say a married couple with an AGI (adjusted gross income) of $200,000 claimed two dependents. Using the previous formula, that family would still get a partial check.
That’s because the previous formula begins with the largest amount you’d be eligible to receive (for example, $1,400 per single taxpayer or $2,800 for joint filers) and adds $1,400 for each qualifying dependent. Then it reduces the total possible sum according to your AGI and the phase-out rate.
It’s a little like starting a test with a perfect 100 point score and subtracting a point for every question you miss, rather than starting with zero points and adding them all up at the end of the test.
But in this case, the dependents you name can start you at a higher value, say 110 points in our classroom example. So by the time you subtract “points,” you may still get more than people who don’t have dependents- even if your AGI is above the maximum cap. The more child dependents you have, the higher your starting value and the higher your ending value, too.
However, the third check is designed to target stimulus payments by setting a firm cutoff, which means that it would start by evaluating your AGI and nothing else. If you’re over the limit, it wouldn’t matter how many dependents you have. You still wouldn’t be eligible for a check.
On the other hand, a family with a large number of dependents and an AGI within the boundaries could still receive a large partial payment, as long as they come in below that absolute upper income limit.
A sliding scale is involved here. For the second check, for example, if your AGI was less than $75,000 as a single taxpayer (that means no kids), you should have received the entire stimulus check total of $600. If you made more than that, the size of your check would diminish until you reached an income level of $87,000, after which point you’d be ineligible.
For the planned $1,400 stimulus check, things have recently changed: You might receive the full $1,400 amount if you earn under $75,000 a year (your AGI as a single taxpayer), with diminishing returns up until an $80,000 cutoff. You’d receive a partial check for an AGI between $75,000 and $79,900.