Do You Have To Pay Taxes On Your Coronavirus Stimulus Payment? This Is What To Know
As the coronavirus continues to spread across the United States, many Americans are awaiting their stimulus checks to help with some of the economic hardships created by the pandemic. As of April 20, CNBC reported that at least 80 million Americans had received their $1,200 stimulus checks via direct deposit, and millions more are still waiting on their payments. But as the stimulus checks continue to go out, a slew of misinformation has generated confusion about the nature of these "economic impact payments." For example, do you have to pay taxes on your stimulus check? Tax experts and congressional officials alike want to clear the air.
Shortly after the Internal Revenue Service (IRS) began issuing stimulus checks, social media users across the country began to panic about potentially having to pay taxes on their checks. Questions like "will I have to pay back my stimulus check next year?" and "will this affect my 2020 taxes?" spread rapidly across online platforms. According to Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, Americans can put their minds at ease. "No, it will not be taxed," Holtzblatt tells Elite Daily. "You don’t have to repay the rebate."
New York Rep. Alexandria Ocasio-Cortez also addressed misinformation about the stimulus checks when she took to Twitter on April 18. "There are a LOT of fake memes going around about the $1,200 stimulus checks," Ocasio-Cortez tweeted. "You do NOT have to pay back your stimulus check next year. Your stimulus check is NOT taxable. The stimulus is yours to keep. No takebacks."
This confusion about the stimulus checks is understandable, though, especially because the IRS had to start issuing these payments with a rapid turnaround. Did you hear that you would have to repay your stimulus check, or that you would be taxed on it? That might be because the stimulus checks are technically considered advance tax credits for the 2020 tax year, per Forbes. Tax credits can either decrease the amount of income taxes you owe, or provide you with a refund. If you claim a refundable tax credit that is greater than the amount you owe in taxes for a given year — even if you owe $0 — then the government will send you a check through the IRS to refund you the remainder of the credit. The stimulus check is an example of a refundable tax credit, but the federal government is issuing the credits in advance to help Americans out during the coronavirus pandemic.
So what does that mean for your 2020 taxes? It may seem complicated, but the short answer is that you will not have to repay your stimulus check, nor will you be taxed on it. According to the IRS' frequently asked questions page about the stimulus checks, the stimulus check is not considered income, and it is therefore not taxable. "The Payment is not income and you will not owe tax on your Payment," the IRS stated on its website. "It will not reduce your refund or increase the amount you owe when you file your 2020 tax return next year." The IRS will also not shave money off your stimulus check if you owe taxes (unless you are behind on child support payments).
You will technically have to claim the stimulus check as a tax credit when you're filling out your 2020 tax return, but you won't get another check — that's why the IRS has described it as an "advance." But the fact that the stimulus check is a unique, refundable tax credit explains why you don't have to worry about paying it back. The federal government has created this tax credit specifically for 2020 to address the pandemic, and your ability to access this tax credit is based on your income. As with any refundable tax credit, the stimulus check is money that the government owes you, and not the other way around. So if you've gotten your check but you've been worried about spending it, don't be — you can use it to pay off your bills without stressing about having to pay taxes on it next year.
If you think you’re showing symptoms of coronavirus, which include fever, shortness of breath, and cough, call your doctor before going to get tested. If you’re anxious about the virus’s spread in your community, visit the CDC for up-to-date information and resources, or seek out mental health support. You can find all Elite Daily's coverage of coronavirus here.
Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center