What to know about the third stimulus bill

U.S. Capitol building at dawn, in front of an orange and rose-colored sky.Image: U.S. Capitol building at dawn, in front of an orange and rose-colored sky.

In a Nutshell

If your finances have suffered because of the coronavirus, you could see more relief soon. A massive $1.9 trillion relief package that includes $1,400 stimulus checks has been signed into law.
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With coronavirus vaccination programs ramping up across the U.S., President Joe Biden signed off on a massive $1.9 trillion pandemic aid package for millions of Americans awaiting economic help.

The bill — dubbed the American Rescue Plan — will provide $1,400 checks to many Americans, enhanced jobless benefits through Labor Day, an expanded child tax credit, rent relief, food aid and health insurance assistance.

The legislation will also direct nearly $350 billion to state and local governments, provide money for the distribution of coronavirus vaccines, and establish a “revitalization fund” of billions of dollars for restaurants.

Read on to learn more about some key provisions of this third coronavirus spending package.

How big are the stimulus payments?

The latest relief package includes an additional stimulus payment — also called a recovery rebate — on top of the $600 payment issued through the stimulus bill passed in December 2020.

The plan provides $1,400 stimulus checks to individuals with adjusted gross incomes of up to $75,000 and $2,800 to married couples filing jointly with an AGI of up to $150,000. Heads of household with an AGI of up to $112,500 also qualify.

You must have a Social Security number to be eligible for a stimulus payment.

A boost for dependents

The first and second rounds of stimulus payments also included up to $500 and $600, respectively, for eligible child dependents younger than 17. The new measure is more generous.

In the third round of relief, adult dependents who are claimed by qualifying taxpayers as dependents — including college students and elderly relatives living with you — are eligible for the $1,400 payments. These payments go to the taxpayer claiming the dependent. So, for example, a family of four that meets the income threshold could get as much as $5,600.

Stimulus check phaseout

Similar to the last two relief payments, some people will get a smaller check if their income is above the income threshold. This time around, however, the phaseout is steep.

Payments disappear entirely for individuals with adjusted gross income of more than $80,000 a year and for couples earning more than $160,000. For heads of household, the cutoff is $120,000.

If you’d like to figure out the size of the stimulus check you might qualify for, try this free calculator at the Washington Post, which has dropped its paywall for pandemic-related content.

How can I get a stimulus payment?

The IRS will likely issue payments based on your most recent federal tax return. So if you’ve already filed your tax return for 2020, the IRS will base your rebate amount on your adjusted gross income for 2020. If you haven’t yet filed a 2020 return, your AGI from your 2019 return will be the basis for calculating your rebate.

People who aren’t required to file a tax return may still be eligible for a stimulus check. The IRS is expected to reopen a portal for non-filers to register for a payment. For up-to-date information about coronavirus-related rebate credits and economic impact payments, check out the resources and guidance page at the IRS.

More details about coronavirus tax relief and economic impact payments are available at the IRS.

When will I get a stimulus payment?

If you’re due a stimulus payment, you could get it quickly, especially if you choose to receive it by direct deposit.

President Biden has said that payments would start in March. The IRS began making direct deposits three days after the last stimulus bill was passed, on Dec. 27, 2020, and began mailing paper checks and debit cards soon after that.

Unemployment benefits extended

With roughly 10 million Americans unemployed in February, lawmakers have been looking to maintain financial support for the jobless. If you are already getting unemployment benefits, those payments will likely be extended for an additional 25 weeks.

How much unemployment insurance am I eligible for?

While unemployment benefits depend on your state of residence, under the bill, the federal government will continue to boost state unemployment benefits by $300 a week through Sept. 6, 2021.

What if I’m self-employed, part-time employed or a gig worker?

The bill extends benefits for gig workers and those who are self-employed — who typically don’t qualify for unemployment insurance — under the Pandemic Unemployment Assistance program. Benefits will be available for a total of 79 weeks and run through September 6.

The bill also extends coverage under the Pandemic Emergency Unemployment Compensation program, helping those who exhaust their regular state benefits. Benefits will be available for a total of 53 weeks running through Sept. 6.

Where can I learn more about unemployment relief?

To find out about unemployment relief in your state, visit the U.S. Department of Labor’s CareerOneStop.

Are unemployment benefits taxable?

Unemployment benefits are generally subject to federal income tax and may be subject to state income taxes if you live in a state with a personal income tax. However, the new law makes the first $10,200 in unemployment benefits tax-free for those with income below $150,000. This is a one-time exception for 2020 only.

Relief for renters

With an estimated 8.8 million households behind on their rent as of December 2020, rent relief could help many families remain in stable housing.

The new relief bill provides more than $25 billion for emergency rental assistance. These funds are in addition to the $25 billion in assistance provided in the second relief package that passed in December 2020.

Who is eligible for rent relief?

Assuming eligibility requirements for rent relief carry over from the second stimulus plan, eligible households have to meet the following criteria:

  • Household income can’t exceed more than 80% of the area’s median income
  • At least one member of the household must be at risk of homelessness or housing instability
  • One or more household members must qualify for unemployment benefits or have experienced financial hardship — either directly or indirectly — because of the pandemic

Under terms of the bill, rental relief could be applied to back rent or utility bills. Eligible households may qualify for 18 months of assistance.

Boost to the child tax credit

To fight child poverty, the new law expands the existing child tax credit, which is currently capped at $2,000 per eligible child. According to the Institute on Taxation and Economic Policy, the relief bill could benefit as many as 83 million children.

The expanded child tax credit, for one year, expands the child tax credit and make it fully refundable.

For 2021, the child tax credit …

  • Boosts the credit to $3,600 for each child under age 6
  • Boosts the credit to $3,000 for each child age 6 to 17
  • Raises the age limit for qualifying children to 17 (from 16)

Normally, a change in a tax credit for 2021 would affect taxpayers’ wallets in 2022, when they would file their 2021 tax returns. But under the bill, taxpayers can receive some of the credit this year as an advance on their 2021 taxes. Payments will begin in July.

Who is eligible for the child tax credit?

Those receiving the full value of the new benefit are …

  • Single filers who have a modified adjusted gross income of up to $75,000
  • Couples who have a MAGI of up to $150,000
  • Heads of household who have a MAGI of up to $112,500

After those thresholds, the extra amount above the previous $2,000 credit decreases by $50 for each $1,000 in MAGI over those amounts.

If you’d like to figure out how much you might get from the expanded child tax credit, try the Washington Post’s free calculator.

Health insurance subsidies increased

The bill temporarily increases subsidies for people who bought their own health insurance through a government exchange. Premiums for those plans will initially cost no more than 8.5% of your income, though the cap could increase slightly over time if your income exceeds a certain threshold.

Additionally, those earning more than the 400% of the federal poverty level — $51,040 for an individual and $104,800 for a family of four — are eligible for assistance.

COBRA subsidies

Buying insurance through the government’s COBRA program will become less expensive under the American Rescue Plan.

If you lose your job, the Consolidated Omnibus Budget Reconciliation Act generally allows you to buy coverage through your former employer. But you usually have to pay at least 102% of the premium, so it can be expensive.

Under the Senate’s version of the relief bill, the government will pay the full cost of the health insurance premium from April 1 through September 30.

If you get a new job and qualify for your new employer’s health insurance, you’ll no longer be eligible for the free coverage.  

How can I sign up for health insurance?

The enrollment period to get a plan through the federal Affordable Care Act health exchange runs through May 15 at HealthCare.gov. You can also switch plans before the cutoff date if you’d like.

To help estimate your premiums, the Kaiser Family Foundation has a health insurance marketplace calculator that takes your income and government subsidies into consideration.

What’s next?

If you’ve been struggling because of the COVID-19 pandemic, you may soon be getting some additional help. Along with stimulus checks, unemployment aid and enhanced tax credits, the sweeping $1.9 trillion American Rescue Plan includes hundreds of billions of dollars directed at those hit hardest by the coronavirus pandemic.

While giving a boost to the economy, this fresh round of aid will also help families who are behind on their rent or having trouble paying for food.

For more information about government benefits and other types of aid, visit Credit Karma’s coronavirus resource hub.

About the author: Brad Hanson is a senior editor at Credit Karma. His 30 years of experience in print and digital media includes work for the Los Angeles Times-Washington Post News Service, Trucks.com and Polyvore. Most recently before… Read more.