The House Budget Committee is marking up a reconciliation bill that includes a third round of $1,400 stimulus checks. The draft of the bill excludes individual taxpayers earning over $100,000 and joint filers making over $200,000 from getting a stimulus payment. Let’s break down what the American Rescue Plan could mean for you – who is eligible for the third stimulus check, how it might be calculated, and how soon you will get it.
Timeline for Biden’s Third Stimulus Check
- February 5, 2021: Vice President Harris casts her first tie-breaking Senate vote just after 5:30 am to approve a budget plan that includes President Biden’s coronavirus stimulus proposal.
- February 5, 2021: House Speaker Pelosi says that the House aims to pass a coronavirus relief bill within two weeks and send it over to the Senate “long before the due date”. Federal unemployment benefits included in former President Donald Trump’s $900 billion relief bill will expire on March 14.
- February 11, 2021: The House Ways and Means Committee completes its markup of nine proposals, including a third round of stimulus checks, under the budget reconciliation process. The proposal will now be reviewed by additional House committees before being submitted to a possible vote.
- February 22, 2021: The House Budget Committee marks up the reconciliation bill for the American Rescue Plan after receiving submissions from nine other committees. This moves the bill one step closer to a possible House vote.
How Much Could the Third Stimulus Check Pay?
The Chair of the House Budget Committee, John Yarmuth (D-KY), released the legislative text for the American Rescue Plan on February 19. The committee will mark up the reconciliation bill on February 22. Democrats hope that the bill will be presented for a House vote by the end of the month.
“We are in a race against time, and aggressive, bold action is needed before our nation is permanently scarred by the human and economic costs of inaction,” he said in a press release.
This bill includes a proposal for a third round of $1,400 stimulus payments, topping off the $600 checks that were already approved by Congress in December 2020, and adding up to $2,000 for millions of Americans.
Just one week earlier, the Committee on Oversight and Reform marked up coronavirus relief measures that could allocate $350 billion in funding to local and state governments, and $570 million in emergency leave for federal and postal workers.
This aid was combined in the reconciliation bill with the legislative proposals that were already submitted by the House Ways and Means Committee on February 11, which include the $1,400 third stimulus check.
The new Democrat plan proposes stimulus payments for individual taxpayers earning up to $75,000 and joint filers making up to $150,000. But whereas the first and second rounds of stimulus payments phased out checks on a sliding scale of $5 for every $100 over the income limit, the new plan cuts off high earners at $100,000 for individuals and $200,000 for couples.
These income limits aim to get the support of conservative Democrats and Republicans who want to target the third stimulus checks to lower income taxpayers.
The budget reconciliation process that opened up the path for this bill was approved on February 2 with a unanimous vote by Senate Democrats. This allowed the party to expedite legislation so that they could pass a budget plan that includes the third round of $1,400 stimulus checks with a simple majority.
Before the President could sign a bill into law, both the Senate and the House will need to approve it with a majority vote. A regular bill in the Senate requires 60 votes to pass, but a reconciliation bill needs only a simple majority of 51 votes. This means that Democrats have enough votes to approve a COVID-19 rescue bill without bipartisan support. Nevertheless, the party made an overture to Republicans for their votes.
“We want it to be a bipartisan proposal,” said Senate Majority Leader Chuck Schumer in a speech before the budget reconciliation vote, “but we also know that we must move forward with the crisis in America.”
On February 4, the Senate voted again on several amendments that included a bipartisan proposal. One of those amendments was introduced by Senators Susan Collins (R-ME) and Joe Manchin (D-WV), and it adds provisions that exclude upper-income taxpayers from getting a third stimulus check. Senators voted 99 to 1 in favor of the amendment.
“Our amendment ensures that this much-needed financial relief gets in the pockets of the struggling families that need it most,” Senator Collins said.
At the present, the draft bill for the third stimulus check says that eligibility will be based on your tax filing status and the new proposed income levels that phase out completely at $100,000 for individuals and $200,000 for couples.
Our tables below will help you calculate different payment options.
How Could the Third Stimulus Check Be Calculated?
The new Democrat proposal mandates the treasury to rely on 2019 and 2020 tax returns to calculate how much you could get for the third round of stimulus checks.
Congress will approve limits based on adjusted gross income (AGI) ranges. This means that taxpayers making less than the minimum threshold could get the full stimulus check, while those earning above it will get reduced payments until they are fully phased out at higher incomes.
You can find your AGI on IRS form 1040. This is calculated by subtracting deductions like student loan interest, health savings account payments, and contributions to a traditional IRA from your gross income.
By contrast, your gross income is the total amount of money that you made during the tax year, including wages, dividends, capital gains, rental property income and other types of revenue.
Your 2019 taxes had to be filed by July 15, 2020. And your 2020 taxes will be due by April 15, 2021.
Who Could Qualify for the Third Stimulus Check?
Millions of Americans who were eligible for the $600 second stimulus checks could qualify for the third round of stimulus payments up to $1,400. However, many high-earning taxpayers who were eligible for previous stimulus checks will now be excluded. Note that the new Democrat proposal completely phases out individuals earning over $100,000 and couples making over $200,000.
For reference, the plan uses the following AGI ranges to determine eligibility for the third round of stimulus checks:
- Singles phase out at AGIs between $75,000 and $100,000.
- Heads of household phase out at AGIs between $112,500 and 150,000.
- Couples phase out at AGIs between $150,000 and $200,000.
Keep in mind that this is different from the sliding scale that was used to determine eligibility for previous stimulus payments. The IRS reduced second stimulus checks by 5% for the total amount made over the AGI limit. This means that payments went down by $5 for every $100 over the limit.
The table below breaks down the third stimulus payments based on the new targeted Democrat income ranges for singles and joint tax filers:
Will Eligibility Requirements Change for Dependents?
The new Democrat plan expands eligibility to adult dependents, including college students and disabled adults. The draft legislation says: “For purposes of this credit, a dependent includes both children and non-child dependents. A taxpayer is eligible for a credit with respect to any individual in the household for whom a Social Security number is associated with such individual on the tax return.”
The House had similarly removed the age requirement for adult dependents in the CASH Act, changing the definition of eligible dependents from “qualifying children (within the meaning of section 24(c))” to “dependents (as defined in section 152)”. Under this section, the term “dependent” means “qualifying child” or “qualifying relative.”
While the new Democrat proposal pays out $1,400 for each qualifying dependent, families should keep in mind that the targeted lower income ranges will exclude them if they earn over $200,000.
For reference, the second stimulus checks currently provide additional $600 payments for qualifying dependents under the age of 17. So a couple filing jointly with three eligible children could get a maximum second payment of $3,000 ($1,200 for married joint filers with an AGI under $150,000, and $600 for each additional qualifying dependent).
But while there is no limit on the number of dependents that you can claim for the second stimulus check, you cannot get the extra $600 for children and adult dependents over the age limit, and they do not qualify for a stimulus check of their own either.
If the new Democrat plan gets approved, then both joint filers and heads of household will get an additional $1,400 payment for each dependent, regardless of age.
The table below breaks down third stimulus checks with targeted lower income ranges for heads of household with one dependent:
Could Mixed-Status Families Still Get Stimulus Checks?
The new Democrat plan says that joint returns maintains eligibility for mixed-status households, which include family members with different citizenship or immigration statuses. A common example of a mixed-status family can be made up of undocumented parents and U.S.-born children.
The draft legislation says that qualifying couples are eligible for a maximum stimulus payment of $2,800. However, in the case of mixed-status families, joint returns with only one valid identification number (this is defined as the Social Security number that is used when filing taxes) will get up to $1,400, and joint returns without valid identification numbers for either spouse will be excluded.
For a comparison, if a U.S. citizen and a noncitizen spouse filed their taxes jointly under the March 2020 CARES Act, they were not eligible to claim the first stimulus check. However, when the $900 billion COVID-19 relief package was signed into law in December 2020, joint filers with one undocumented spouse became eligible for the second stimulus check, as well as additional payments for child dependents.
You should note that “nonresident aliens” are not eligible for the new Democrat proposal. They were also excluded from the first and second stimulus checks. Currently, the IRS says that “qualifying resident aliens” with valid Social Security numbers for employment are eligible for stimulus payments as long as they have not been claimed by another taxpayer as a dependent.
How Soon Could You Get the Third Stimulus Check?
The House Budget Committee will mark up the reconciliation bill for the American Rescue Plan on February 22. This moves the draft legislation one step closer to a possible House vote. Democrats aim to pass a relief package before a $300 weekly unemployment supplement expires on March 14.
On February 2, Senate Democrats voted unanimously to start the budget reconciliation process that opened up a path to pass legislation for a third stimulus payment with just 51 votes.
Opposing Senators were expected to filibuster (delay of block) legislative action for a third stimulus check bill. This means that all bills subject to filibuster require three-fifths (or 60 out of 100 Senators) to close the debate. If President Biden’s American Rescue Plan had followed this legislation process, it would have needed bipartisan support from Congress — 10 Republican Senators in addition to all 50 Democrats in the chamber, and a majority vote in the House of Representatives — to get approved into law.
The budget reconciliation process prevents a bill from being filibustered and allows it to get passed with a simple majority. In this case, President Biden’s relief proposal was approved in a budget plan with the support of all 50 Democrats in the Senate and Vice President Harris’s tie-breaking vote.
On February 10, the House Committee on Financial Services released draft legislation for President Biden’s $1.9 trillion stimulus package. Then on February 11, the House Ways and Means Committee advanced part of that package through the budget reconciliation process, worth nearly half of the $1.9 trillion.
Several other House committees also reviewed and submitted proposals that were later combined into one 591-page reconciliation bill by theHouse Budget Committee on February 19.
Now, House Speaker Pelosi (D-CA) says that Democrats aim to pass this bill by the end of February. She told press on February 18 that after the Budget Committee concludes its markup, the bill “will then go to the Rules Committee for us to vote on sometime at the end of next week is my hope.”
As soon as the bill gets signed into law, the Treasury Department will start distributing the third stimulus checks within one week or two. For reference, the $600 second stimulus checks started going out to taxpayers on December 29, 2020, two days after President Trump signed the $900 billion COVID-19 stimulus package into law.
For more information on how third stimulus payments will be sent out, read our section about IRS delivery methods and tracking below.
How Could a Third Stimulus Check Bill Get Passed into Law?
The legislative process for passing a third stimulus check bill could take weeks or longer. Below we have broken down the general steps for passing a bill into law:
- A member of the House of Representatives or the Senate will have to draft a new spending bill.
- Either a House Representative or a Senator will need to introduce the bill as a sponsor in their respective chamber.
- The bill will be reviewed carefully by different committees to determine its possibility of getting passed through Congress. A committee could delay the bill by calling for a hearing to better understand the impact of a third stimulus check. The bill could die if a committee does not act on it.
- The bill could be sent to a subcommittee for a deeper study and additional hearings. This could lead to more changes, which have to be voted on before heading back to the full committee.
- The committee meets again to mark up the bill with a final round of changes and amendments. It must then vote to report the bill to the chamber of Congress that sponsored it. If it votes against reporting the legislation, the bill will die.
- Either the House or Senate where the bill was reported will debate and then vote to approve or defeat it.
- After the bill passes in either the House or Senate, it will go to the other chamber to follow the same steps for a vote. If additional changes are made, Congress could set up a conference committee to reconcile differences between both versions of the bill, and create a report that has to be approved by House and Senate votes. If this committee cannot reach an agreement, the bill will die.
- The president then gets the reconciled bill and has 10 days to sign the legislation into law. In the case of a veto, Congress will need to get a two-thirds vote in both chambers to override it into law.
How Could Third Stimulus Checks Be Sent and Tracked?
The IRS will make payments via direct deposit, paper check and prepaid debit cards.
For a comparison, direct deposits for second stimulus checks started going out on December 29, 2020. Paper checks followed one day later, and the IRS said that it sent out approximately 8 million prepaid debit cards loaded with stimulus payments.
The IRS was mandated by Congress to deliver the $600 stimulus checks by January 15. Eligible taxpayers who do not get payment by the cutoff date, will have to claim their stimulus as a recovery rebate credit on their 2020 tax return, which is due by April 15.
Note that eight million eligible recipients may not have yet received their first or second stimulus checks. President Biden signed an executive order on January 22, asking the Treasury Department to deliver direct payments to all qualifying recipients.
You will be able to follow up on the status of all your stimulus payments on the IRS’s “Get My Payment” portal.
Keep in mind that if you collect Social Security retirement benefits, Social Security survivor benefits, Social Security disability benefits, Supplemental Security Income (SSI), Railroad Retirement benefits and VA benefits, you could automatically get a possible third stimulus check via direct deposit as long as you have your bank account on file with the IRS.
The agency also mailed out letters (Notice 1444-A and Notice 1444-B) to eligible recipients for the first two rounds of stimulus checks, breaking down the amounts of the payments, how they were delivered and how to report them if they were not received.
IRS Requirements: Will My Stimulus Check Be Taxable?
The IRS did not consider either of the first two stimulus checks to be taxable income. The agency says that because stimulus payments are “not includible in your gross income,” you will not have to report them on your federal income tax return, or pay income taxes on either check.
You should also note, that if you owe taxes, you could still qualify to get a stimulus payment because the IRS will not use it to offset federal or state tax debts like it normally does with tax refunds. The CARES Act, however, mandates holding back money if you are past-due on child support.
Qualifying taxpayers who did not get the full amounts of their stimulus payments could claim a recovery rebate credit to increase their tax refund or lower their tax bill.
As an example, if you have to pay $1,600 in taxes this year, and the government still owes you the maximum stimulus payment of $1,800 (that’s $1,200 + $600 for the first and second checks), then you can use your recovery rebate credit to offset your tax bill and get a $200 tax refund.
But, on the other hand, if you’re expecting to get back money from your tax return, then your tax refund could be significantly higher depending on how much you are owed from your stimulus checks.
When Is the Best Time to File Taxes for the Third Stimulus Check?
If your income fell in the 2020 tax year, you may want to file your tax return earlier to qualify for a third stimulus check.
The new Democrat bill will target lower income ranges to exclude higher-earning taxpayers from getting a payment.
Filing at the beginning of the tax season with a lower income may help you qualify for a bigger check.
However, if your income went up in tax year 2020, then you may want to delay filing so that eligibility is determined by your lower 2019 income.
You may also want to file early if the size of your family increased in 2020. The House Committee bill includes a child tax credit that pays up to $3,600 for each qualifying child under 6 years old, and $3,000 for every child between ages 6 and 17.
This means that if you became a parent during the tax year, you could get an additional payment by claiming your child as a dependent earlier.
With the pandemic, many Americans are looking towards their tax refunds to get an extra boost for their finances.
The IRS says that the average tax refund in 2020 was more than $2,500, and it expects over 150 million tax returns to be filed in 2021.
The 2021 tax season began on February 12. You will need to file your 2020 taxes by April 15. Taxpayers filing online and claiming the earned income tax credit (EITC) or the additional child tax credit (ACTC) could get their refund via direct deposit by the first week of March.
You can use SmartAsset’s tax return calculator to figure out your 2021 tax refund or tax bill.
How Are Americans Using Stimulus Checks?
The U.S. Census Bureau said in a 2020 study that the majority of recipients who got the first stimulus check spent their payment on household expenses. Adults with incomes between $75,000 and $99,999 told the Census that they would most likely pay off debt or add to their savings. While adults making less than $25,000 said they would use their stimulus to pay for expenses.
For those households that spent their first stimulus checks, the study says that:
- 80% used it on food
- 77.9% used it on rent, mortgage and/or utilities (these include gas, electricity, cable, internet and cellphone)
- 58.2% used it on household supplies and personal care products
- 20.5% used it on clothing
- 8.1% used it on household goods (these include TVs, electronics, furniture, appliances and recreational goods like fitness equipment, toys and games)
The U.S. Bureau of Labor Statistics similarly found that the majority recipients spent their first stimulus check on essential needs, including food (66%), utilities and internet/phone (50%), household supplies and personal care (47%) and rent (28%). Only 25% of recipients said they would use their first stimulus check to pay down debt and 16% said they would use it to add to their savings or invest.
Another study pointed out that recipients are less likely to spend their stimulus checks on the economy. The Federal Reserve Bank of New York said that only 29% of households surveyed spent their first stimulus checks by June 2020, while 36% saved them, and 35% paid down debt. This trend could indicate that recipients of second and third stimulus checks may be even more inclined to save the money and pay down debt.
For additional context, the Bureau of Economic Analysis said that consumer spending had increased $737.7 billion (5.6%) in June 2020. But by November 2020, it had decreased $63.3 billion (0.4%). By comparison, personal saving was $3.37 trillion in June and the personal saving rate was 19%. But by November personal saving had gone down to $2.22 trillion and the rate was 12.9%.
House Democrats are one step closer to passing a bill that includes President Joe Biden’s coronavirus relief proposal and changes the income threshold to target third stimulus checks for lower-income Americans. This will top off the $600 second stimulus checks with an additional $1,400 payment. If the relief bill gets passed in the House, it must then go back to the Senate for another vote. Both chambers of Congress must pass the bill before it can get signed into law.
It’s important to keep up with the latest developments so you can know what type of aid you could qualify for. We will continue to update this article as soon as new information becomes available. You can also find other relief programs at the federal government help center and our list of coronavirus relief programs by state.
Tips for Individuals During the Coronavirus Pandemic
- If you don’t need to use your stimulus check for anything urgent, consider investing or saving the money. A financial advisor can help you get started if you need help managing your money or investments. SmartAsset’s free tool can match you with financial advisors in your area in just five minutes. Get started now.
- If you are struggling to keep up with loan or credit card payments, you can take steps to protect your credit score and speak with your bank directly to see whether you can defer loan payments or waive certain fees.
- If you can afford it, investing in index funds during a recession is a safe option. But if you’re looking for a slightly more aggressive approach, check out some free investment classes to learn more.