If you’re taking advantage of this year’s extended deadline to file your tax return (in other words, procrastinating), then you may still be wondering if your stimulus check counts as taxable income.
The short answer is – nope! CARES Act payments are not taxable and do not need to be repaid. In fact, as far as the IRS is concerned, these payments don’t function as income at all. They are actually considered a tax credit (the Recovery Rebate Credit, to be specific).
For most of us, this credit was paid in advance of 2020 taxes in the form of Economic Impact Payments – i.e. federal stimulus checks – depending on eligibility. But if you didn’t receive any stimulus payments for some reason, or didn’t receive the full amount you were eligible for, there’s still a chance to benefit from the credit.
On Line 30 of this year’s Form 1040, you’ll be asked to report the amount of stimulus funds you received.
If you received less than the amount you were eligible for, you can credit your taxes for the difference. And here’s a real kicker – even if you somehow received more than the amount you were eligible for, you won’t owe the difference.
Finally, on a slightly different but still-related note, the usual tax on unemployment payments is also tweaked this year. If your adjusted gross income (AGI) for 2020 was under $150,000, then up to $10,200 of your unemployment benefits are tax-free.
Obviously, a global pandemic is a nightmare for everyone – so be sure to get your money’s worth out of these tax breaks while they’re here! You deserve that much.
– Graham