Updated May 13, 2020

43% of Americans Will Put Their Stimulus Check Toward Debt, Only 20% Toward Spending

COVID-19

Not only is COVID-19 a generation-defining public health crisis, but it has also led to a near shutdown of economies around the world.

In an attempt to “flatten the curve” and slow the effects on the healthcare system, many businesses have shuttered, resulting in 3,283,000 Americans filing for their first week of unemployment benefits in the latest report from the Department of Labor.

In response to this crisis, last week the president signed into law a bill approving $1,200 stimulus checks for many Americans.

In light of this legislation, Money Done Right worked with Google Consumer Surveys to ask over 1,000 Americans if they would use their stimulus check to spend, save, pay off debt, or invest.

Key Findings:

  • 43% of Americans will put their stimulus check toward debt, and only 20% toward saving. This is contrary to the goal of a stimulus benefit, which is to boost the economy by providing consumers additional money to spend.
  • 17% of American men plan on using their stimulus check to invest, compared to 9% of women.
  • 47% of American women plan on using their stimulus check to pay off debt, compared to 39% of men.

43% of Americans Will Put Their Stimulus Check Toward Debt

We found this response interesting given that many creditors — including credit card companies, mortgage companies, and other holders of American consumer debt — are extremely willing to work with their customers during this trying time.

Gender Differences

While an approximately equal percentage of men and women plan to spend or save their stimulus checks, the genders are more divided when it comes to investing and paying off debt.

Men are twice as likely as women to invest their check, while women are more likely to pay off debt.

2020 COVID-19 Stimulus Checks: An Overview

This isn’t the first time stimulus checks have been sent out.

  • In 2001, there was a stimulus in the form of a tax rebate. The tax rebates were part of a 10-year tax cut bill.  Households received rebates that were either $300 or $600.
  • There was also the Economic Stimulus Act of 2008, in which economic stimulus money was sent to help avoid recession and boost the economic conditions at the time. Under this stimulus act, taxpayers below a certain individual income limit received at least $300 per person and $600 for married couples filing jointly. The checks couldn’t exceed $600 for a single person or $1200 for a jointly-filing married couple.
  • In 2009 then-President Obama passed the American Recovery and Reinvestment Act. Under this legislation, there were $14.2 billion sent out as a one-time payment. The payments went to recipients of Social Security, veterans, railroad retirees, and Supplement Security Income recipients.

But this most recent legislation is the largest emergency aid package in U.S. history.

The plan will provide assistance to the tens of millions of households throughout American impacted by coronavirus.

The different components of the bill include stimulus payments to individuals, unemployment coverage for individuals, changes in retirement account rules, and alterations to student loans.

How Much Are the Stimulus Checks?

If you file as single and your adjusted gross income was $75,000 or less on your 2019 tax return you’re eligible for the full $1,200 payment.

If you file jointly with your spouse and your adjusted gross income was $150,000 or less on your 2019 tax return, you’ll receive $2,400.

Also, if you have children under the age of 17, you will get an additional $500 check per child if you are single and your adjusted gross income is $99,000 or less or you are married filing jointly and your adjusted gross income is $198,000 or less.

So just doing some math here, if you’re a married couple with two children under the age of 17 and your adjusted gross income is $150,000 or less per your 2019 tax return, you’d be looking at a $3,400 check.

Now what if you made more than $75,000 and you file single or more than $150,000 and you file married filing jointly.  Well, your stimulus check will be reduced by five cents on the dollar  in adjusted gross income over those threshold amounts.

So if you’re single and make $80,000, that’s $5,000 over the threshold.  $5,000 times five cents is a $250 reduction, and $1,200 less $250 is $950, so your check would be for $950.

What If You Haven’t Filed Your 2019 Tax Return?

They’ll look at your 2018 tax return.

But what if your 2018 income was over the threshold, so you wouldn’t be eligible for a check based on your 2018 income, but let’s say your income was less in 2019, but you haven’t filed your tax return?  What happens then?

In this situation, our understanding is that you wouldn’t get a check now, but you would be receive a credit equal to the stimulus check you would have received had you filed your 2019 tax return.

The same is true if your income dropped in 2020; you wouldn’t get a stimulus check now, but you will get a tax credit for the amount you’re entitled to when you file your 2020 tax return next year.

What If I’m on Social Security and Don’t File a Tax Return?

The IRS went back and forth on this, but as of right now, if you’re on Social Security and aren’t required to file a tax return, you are still eligible if you got a Form SSA-1099 for the year.

What If I’m a Dependent?

Also, if you can be claimed as a dependent on someone else’s tax return, you are not eligible for a stimulus check.

What If I’m Not a U.S. Citizen?

If you aren’t an American citizen, but you live and work in the U.S. with a valid Social Security number, you also qualify.

However, you don’t qualify if you are a visitor or are in the U.S. illegally.

How to Get a Coronavirus Stimulus Check (What You Need to Do)

If in the past two years, you’ve received your tax return by direct deposit, your money will be sent to that account, and Treasury Secretary Steve Mnuchin has said that payments could be sent in as early as three weeks.

Will that happen?

I don’t know, but don’t hold your breath.

And what if your bank account has changed?

Well, the IRS has stated that they are working on a portal where you can update your bank account information.

6 Things to Do with Your Stimulus Check

There are different options you have available to you as far as how you spend or save your stimulus check. In some ways, the government usually encourages the idea of spending the money because that’s how it can ultimately stimulate the economy, but what you do is up to you.

The Basics

If you’ve already lost your job or you have a business that’s been very impacted, you will probably need to use your check on the basics such as food, housing costs, utilities, and gas.

Be aware that many banks and lenders are being flexible with people right now and putting a hold on their monthly payments.

Emergency Savings

Your stimulus check can go into emergency savings, which can be comforting the level of uncertainty going on right now. An emergency savings account doesn’t necessarily mean that you put cash under your mattress.

Instead, you might want to put it into a liquid savings account that earns a bit of interest. Liquid means it’s a way to access your money quickly and without penalties, if you need to.

Interest rates are low right now, so it’s not ideal, but a money market account, a CD or a high-yield savings account does give you liquidity if you need to access your money quickly and you earn a bit more than you would with your money sitting in a checking account which earns little to no interest.

Pay Off Costly Debt

If you have high-interest debt, like credit card debt, and you’re not in a situation where you need emergency cash right away, consider paying some of it down.

If you pay some of your debt off, or even better all of it, it can help you cut out a monthly expense later on.

Add to Your Retirement Fund

If you have a traditional IRA or Roth account, you can still contribute to your account, and the upside in addition to the savings component is the fact you can then use your contribution to reduce your tax liability for 2019.

The IRS extended the tax filing deadline to July 15, and with that came an extension on the deadline to contribute to your traditional or Roth IRA.

Invest in the Stock Market

The stock market has undoubtedly been on a roller coaster in recent weeks, but if you have the stomach for that, you can put your stimulus check into the market. You can still find good deals, although most analysts aren’t sure when the market will fully reach its bottom, so this is risky.

Make a Donation

If you can afford to, consider donating your stimulus check or some of it. Many charitable organizations and food banks are seeing a rise in demand.

Coronavirus Stimulus Check FAQs

The following are answers to some of the most common questions you might ask about coronavirus stimulus checks.

Do I qualify for a stimulus check?

If you are a U.S. resident and you have a valid Social Security number, and meet income requirements, you qualify for a coronavirus stimulus check. If your income comes completely from means-tested programs and is nontaxable, as is the case with Supplement Security Income as a result, then you are also eligible.

If you are a dependent on another person’s tax return, you don’t get a payment, however dependent children under the age of 16 qualify for an additional $500.

Also, if you’re behind on child support, you are likely ineligible for a stimulus check.

When will I get my stimulus check?

According to Treasury Secretary Steve Mnuchin, people could begin receiving direct payments from the IRS within three weeks. For people without direct deposit, it can take weeks or months for checks to be sent out.

Where will I receive my check?

If you don’t receive a direct deposit, you will receive a check to the last known address the IRS has for you.

What if I moved since I filed my return?

If you’ve moved since you last filed your taxes, you might need to contact the IRS and tell them your new address. You can use a Change of Address Form, send your new address when you file or send a written statement. You can also call the IRS and tell them.

Will there be more stimulus checks?

Currently, the plan is to send out a one-time payment, but lawmakers and the Treasury Secretary have said they may need to revisit that in the future.

Are the stimulus checks taxed?

While it’s not entirely certain right now, the indications are that the money isn’t taxable.

What is adjusted gross income?

The income the government is using for their payment calculations is based on your adjusted gross income. Adjusted gross income is your wages, dividends, capital gains, and other income minus student loan interest, 401(k) payments and other deductions.

How do I tell the IRS my direct deposit information if it wasn’t on my tax return?

OK, so the IRS has said that in the coming weeks they are developing a web-based portal where you can provide your banking information to the IRS so that you can receive your payments “immediately” — yes, they use the word “immediately” as opposed to checks in the mail.

I would highly recommend that you do this, especially if you need this stimulus money pronto.  Direct deposit will come so much faster than a paper check, it’s just like your tax refunds, direct deposit comes faster.

What do I do if I didn’t have to file a 2018 or 2019 tax return?

The answer is yes.  This is different than what we thought last week because the IRS said, “Most people don’t have to do anything.”  But in their new guidance, they say, “People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment.”

This won’t be a full-blown tax return, but it will indicate things like their filing status, number of dependents, and of course their direct deposit bank account information.

How do you file this “simple tax return”?

The IRS doesn’t know yet.  They haven’t put it together yet, but the minute it comes out, I will let you all know, and I will walk you through it right here on the channel, so be sure to subscribe so you get that notification.

What if I should have filed a 2018 or 2019 tax return but I just didn’t?

Do it ASAP.  It’s not clear if that simple tax return that I just talked about — which is for people who didn’t have a filing obligation — will cover you.  So you want to file ASAP.

How long are these economic impact payments available?

The IRS said these payments are available throughout the rest of 2020.

Other 2020 Coronavirus Resources

The following are some of the other elements that are part of coronavirus legislation.

Families First Coronavirus Response Act (FFCRA)

Under the Families First Coronavirus Response Act, there are outlines for employer-paid leave requirements. Details of what employers have to provide employees include:

  • Up to two weeks or 80 hours of paid sick leave at the regular rate of pay if the employee isn’t able to work because of being quarantined or is experiencing COVID-19 symptoms
  • Two weeks or up to 80 hours of paid sick leave at a rate of two-thirds of the normal rate of pay if the employee can’t work because of the need to care for someone subject to quarantine or to care for a child under the age of 19 whose child care provider or school is closed or not available
  • If an employee has been employed for at least 30 days, their employer also has to provide up to 10 weeks of paid expanded family and medical leave at a pay rate of two-thirds of the employee’s regular rate if they can’t work because their child’s school is closed or because of reasons related to COVID-19
  • It’s important to note with this that these things don’t automatically apply across the board. For example, the paid sick leave and expanded family leave apply to public employers and private employers with fewer than 500 employees.

Small businesses with fewer than 50 employees may qualify for an exemption.

Student Loan Relief

Federal student loan borrowers won’t be penalized for making any late payments through September 30, under the coronavirus legislation.

If a federal student loan qualifies, there is an automatic zero-interest deferment option.

Private student loan borrowers don’t get relief from the bill. Only those borrowers with public-backed loans qualify.

Unemployment Insurance

There are expansions of unemployment insurance. When you’re on unemployment insurance in your state, you are eligible for an extra $600 a week in federal emergency compensation. That additional $600 a week is added to what you get in state benefits.

You also receive the $600 if you were receiving unemployment benefits before the COVID-19 outbreak.

If you work from home and you’re employed, you’re not eligible.

There is also a new program called Pandemic Unemployment Insurance. This offers benefits to freelancers, contractors, people who are self-employed, and gig workers who wouldn’t otherwise be able to qualify for emergency compensation.

Retirement Accounts

For the calendar year 2020, under the legislation, no one has to take a required minimum distribution from their workplace retirement savings plan or their retirement account. An example of this type of account is a 401(K).

The reason this was included in the bill is that it helps people avoid being forced to sell their investments that have gone down in value, so they don’t have to take a loss right now.

If you need to take money out of your retirement account, you can withdraw up to $100,000 without the usual 10% penalty if you’re taking it out because of the pandemic outbreak.

You can also borrow twice the usual amount from your workplace retirement plan or 401(k).

Contributions to Charity

There is a new charitable deduction available under the bill for up to $300 annually in contributions. It’s available if you don’t itemize deductions.

Protection for Renters

In the bill, there is a national, temporary moratorium on evictions for renters whose landlords have mortgages that are either owned or backed by federal entities like Fannie Mae or Freddie Mac. This lasts for 120 days after the passage of the bill, and it also says landlords in these situations can’t charge penalties or fees for not paying your rent.

Small Businesses

Because of COVID-19, the federal government is putting in place expanded options for small businesses to access funding. For example, small business owners in all states and territories can apply for a low-interest loan due to COVID-19.

The SBA is going to be working with state governors to provide targeted loans to eligible small businesses severely impacted by COVID-19.

The Express Bridge Loan Pilot Program will offer help to small businesses that currently have an SBA Express Lender relationship. They may be eligible for up to $25,000 and they are loans meant to bridge the gap while applying for an SBA Economic Injury Disaster Loan.

State Resources

States are setting up their own plans to help residents impacted by COVID-19, in addition to the federal measures.

California

  • California is suspending the 60-day notice requirement for employers to give written notice to employees if they’re closing their business.
  • If your business is directly affected by COVID-19, you can request an extension up to 60 days to file state payroll reports without penalty or interest.
  • If you can’t work because you are exposed to COVID-19, and a medical professional certifies it, you can file a Disability Insurance Claim. Disability Insurance in California offers short-term payments to eligible workers who have a partial or full loss of wages.
  •  If you can’t work because you’re caring for a family member who is sick or quarantined, you can file a Paid Family Leave claim. Paid Family Leave provides up to six weeks of benefit payments to workers who have a full or partial wage loss.
  • If your child’s school is closed requiring you to miss work to care for them, you might be eligible for Unemployment Insurance benefits, and you may also be eligible if you have reduced work hours.

New York

  • All New York City students can get three free meals a day from the NY Department of Education
  • NYC Department of Education for the Aging is providing delivered meals to eligible seniors and people with disabilities.
  •  New York State is dropping the 7-day waiting period on Unemployment Insurance benefits

Washington

  • Washington has changed requirements to help more people in the state get access to unemployment, and the one-week waiting period for benefit eligibility is being waived.
  • There are programs being made available to employers to help them keep their employees. For example, there is something called SharedWork. Under this program, employers can reduce their employees’ hours by as much as 50%, and employees can get partial unemployment benefits.
  • Under the Industrial Insurance Act, workers’ may have expanded ways to apply for workers’ compensation if they were exposed to coronavirus during their job.

Pennsylvania

  • The Pennsylvania governor announced new funding to help small businesses affected by the COVID-19 outbreak through something called the Pennsylvania Industrial Development Authority’s Small Business First Fund.
  • The required Waiting Week for unemployment claims has been suspended.
  • Work search and work registration requirements are temporarily suspended for all unemployment claimants.

As the days and weeks go on, we may learn more about different programs and options available federally and on a state-by-state basis to help people and businesses affected by the COVID-19 pandemic.

Logan Allec, CPA

Logan is a practicing CPA, Certified Student Loan Professional, and founder of Money Done Right, which he launched in July 2017. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.

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