Am I eligible for the $1,200 Recovery Rebate?

Daniel Lee, CFA, CFP®

Millions of Americans will soon be receiving cash support from the government as part of the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act. The Recovery Rebate is a one-time stimulus intended to financially support individuals and families during the Coronavirus pandemic.

The American Enterprise Institute estimates that roughly 84% of Americans will receive the full benefit and that another 7% will receive at least a partial benefit. Here are three things to know about the Recovery Rebates.

1. How much is the rebate?

The Recovery Rebate could be worth as much as $1,200 for single, and $2,400 for married couples. In addition, a family is eligible to receive an additional $500 for each dependent under the age of 17. A family of four with 2 young children, for example, is eligible to receive as much as $3,400. The rebate is not considered a taxable income.

The rebate is reduced $5 for every $100 of income that is above a specified amount. Individuals will see their rebate reduced if their adjusted gross income, or AGI, is over $75,000, head of households at $112,500, and married couples at $150,000. The rebate can be completely eliminated for high-income earners. For example, single filers with an AGI above $99,000 with no dependent children will not get a rebate.

Chart about Proposed Relief Rebate in the CARES ActSource: https://taxfoundation.org/cares-act-senate-coronavirus-bill-economic-relief-plan/

Here's how it all lays out based on income, filing status, and number of children.

  • Married filers with two children are eligible for a rebate as much as $3,400. The rebate is reduced for families with AGI over $150,000 and completely eliminated after $218,000.
  • Married filers with one child are eligible for a rebate as much as $2,900. The rebate is reduced for families with AGI over $150,000 and completely eliminated after $208,000.
  • Married filers with no children are eligible for a rebate as much as $2,400. The rebate is reduced for families with AGI over $150,000 and completely eliminated after $198,000.
  • Head of household single parent with two children is eligible for a rebate as much as $2,200. The rebate is reduced for families with AGI over $112,500 and completely eliminated after $156,500.
  • Head of household single parent with one child is eligible for a rebate as much as $1,700. The rebate is reduced for families with AGI over $112,500 and completely eliminated after $146,500.
  • Single filers are eligible for a rebate as much as $1,200. The rebate is reduced for individuals with AGI over $75,000 and completely eliminated after $99,000.

2. What is my AGI and how is it calculated?

AGI is generally your wages, dividends, alimony received, capital gains, business income, and retirement distributions, minus certain applicable deductions such as contributions to a traditional IRA, health savings account, and half the self-employment tax.

Your AGI can be found on your tax return. It is on the first page of your Form 1040. The IRS will look at the AGI on your 2018 or 2019 tax return, whichever is the most recent.

Millions of people that are financially impacted by the Coronavirus and might have themselves in a position where they had a healthy income in 2018 or 2019, but that their income will be significantly less in 2020. If your AGI on your latest tax return was above the threshold, but you expect your 2020 AGI to be below, you will still get the rebate.

You just won’t get the rebate until you file your 2020 returns next year. The IRS will also true-up your rebate. For example, if you are only eligible for half of your rebate now but qualify for the full rebate according to your 2020 AGI, you will receive the extra amount on your 2020 tax return. This is also true if you have a child born in 2020 and are eligible for an additional $500 rebate.

If the situation is reversed, and your 2018 or 2019 income is below the income threshold, but your 2020 income is above it, you will not have to pay the government back.

3. When will I get the rebate?

The IRS has not announced a schedule, but Treasury Secretary Steven Mnuchin is hoping to start issuing the first checks as soon as mid-April.

There is no action required if you are one of the 82% of taxpayers that received a refund in 2018 or 2019 via direct deposit. The stimulus rebate will be direct deposited into the same account you received your tax refund. Eligible Social Security recipients will get their rebate in the account they receive their Social Security benefits.

The IRS will first try to send your rebate to the bank account listed in your latest return. If the bank rejects your direct deposit, the IRS will send a paper check to the mailing address listed on your return.

Here are some recommendations to ensure you get your rebate sooner than later:

  • The first people to get the rebate will be those that received a tax refund via direct deposit. If you changed your bank account recently or don’t have one on file with the IRS, the IRS is working on a website for you to provide them with a bank account to electronically deposit your rebate. Continue to look for updates from the IRS.
  • Update your address with the IRS if you prefer a paper check and have moved since the last tax return. You will likely not get your rebate as quickly as those getting it direct deposited electronically, but having your current address on file will certainly help.
  • If you do not file a tax return for whatever reason, you will need to file a simple return to receive the rebate. Consult a tax professional or check the IRS website for information on ways to do this for free.

You will get a paper notice in the mail after your payment has been disbursed. The notice will include where and how it was sent, and where to contact if you did not receive your rebate.

For more information and the most recent updates on the recovery rebate, check the IRS website at www.irs.gov/coronavirus.


Disclaimer: This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.