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Lawmakers on Sunday finally reached an agreement regarding the terms of another coronavirus relief package, which is expected to provide eligible Americans with additional individual stimulus payments totaling as much as $600. That figure excludes further sums that individuals and families can receive for qualified dependents.
The proposed legislation has not yet formally passed in Congress, although both chambers are voting to finalize the $900 billion package on Monday. In addition to a second round of direct payments—following the $1,200 checks distributed earlier this year under the bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act—the latest bill includes enhanced unemployment benefits and financial support to small businesses.
Much like the stimulus package signed into law last spring, this one is designed to offset economic burdens incurred as a result of the COVID-19 pandemic.
How much individuals, or married couples, can expect to receive in direct payments under the new legislation depends on their annual income brackets.
Similar to eligibility criteria established through the CARES Act, individuals who earn $75,000 or less will qualify for the full $600 relief check, as will couples who earn twice that amount.
Individuals considered a head of household will also qualify for the full payment if their annual incomes amount to $112,500 or less. Recipients with qualified dependents can also expect an additional $600 in federal aid per child.
The Internal Revenue Service (IRS) offers a number of resources and guides that allow individuals to determine whether they are eligible for stimulus payments, and if so, what their relief compensation might look like in dollar amounts.
As the IRS notes, income information used to determine eligibility for stimulus payments is based on an individual's most recent federal tax returns. This most likely means returns filed for income earned in 2019, although officials will use an individual's 2018 tax information if the person(s) did not file federal returns this year.
A person's adjusted gross income (AGI), or taxable income, is the amount federal officials will evaluate when determining qualifications for stimulus payments. An AGI is calculated by subtracting adjustments from annual gross income, which can incorporate a number of personal revenue sources outside of regular wages.
For example, withdrawals from a 401(k) or IRA account, under circumstances that classify the distributions as taxable, are considered income and generally contribute to individual's annual AGI.
Other earnings, such as proceeds from insurance policies and inheritances, typically are not considered taxable income, so when they're not, they are not determining factors in an individual's AGI. The value of inherited property becomes taxable only after it produces additional income, either through interest, rent payments or dividends. For traditional IRAs: "If a beneficiary receives a lump-sum distribution from a traditional IRA he or she inherited, all or some of it may be taxable."
Payments received through federal COVID-19 relief initiatives will not contribute to an individual or couple's taxable income when filing returns next year. Both the CARES Act and upcoming relief legislation stipulate that eligible recipients are qualified for payments tax-free, meaning the relief funds are not considered taxable income.
Newsweek reached out to the Treasury Department for comment but did not receive a reply in time for publication. The IRS could not provide additional information at this time.
