by Lucas Casarez
With the passing of the CARES Act on Friday, March 27, the federal government is stepping in to reduce the impact of Covid-19 on its citizens and the U.S. economy. Here are a few ideas of what to do with your stimulus check and who is eligible to receive one.
Americans Who Pay Taxes
You will receive a one-time payment of up to $1,200 for an individual or $2,400 for those who are married filing jointly. If you claim a child under age 17 on your tax returns, you will receive an additional $500.
There is a cap of $1,000 in child credits for single and $2,000 for married, filing jointly.
Your income plays a big factor in whether you’ll receive a check. There is a phaseout of $5 for every $100 that you exceed the following Adjusted Gross Income (AGI) limits:
$75,000 Single or $150,000 married filing jointly.
Do I Need to Do Anything?
In most cases, you don’t need to act. The feds will reference your most recent tax return to verify your income against the phaseouts and to confirm your child credits. If you haven’t yet filed for 2019, you may want to do that quickly if your income was too high in 2018 but then dropped in 2019. You might also want to file if you had an additional child in 2019 who wouldn’t have appeared on your 2018 tax return.
How Soon Will I Receive It?
While no timeline has been set, the goal is to get this money to the American people quickly. But the logistics of sending out direct deposits and checks to millions of U.S. citizens will likely take a minimum of a few weeks.
If you received a direct deposit for your tax return, then you can expect that will be the same method used for your stimulus check. If your bank information isn’t on file with the IRS, then your payment will arrive by check.
How Can I Make the Most of It?
Without knowing the details of your overall financial situation, I can still offer you the general guidelines I share with my clients:
1) Don’t waste it!
2) Establish short-term goals.
3) Pay off high-interest debt.
4) Build your emergency savings fund.
5) Invest in long-term goals.
No one can yet predict how they will be financially impacted by COVID-19 so it’s important to plan for this uncertainty. You may plan diligently and use your stimulus check wisely and then discover that you were not too negatively impacted by the crisis. You will then be in a better financial situation to navigate life once the pandemic has abated and life returns to more recognizable patterns.
Lucas Casarez is a husband, father of two amazing kids, and a Certified Financial Planner™. He founded Level Up Financial Planning, which is one of the few fee-only financial planners in Northern Colorado. The mission of Level Up Financial Planning is to guide his clients in taking their financial confidence to the next level.
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