Calculating the Individual Recovery Rebate from the CARES Act

As part of the recently-passed massive Coronavirus Aid, Relief, and Economic Security (CARES) Act, taxpayers will receive a direct stimulus payment within the coming weeks. This one-time remittance is based on an individual’s 2019 adjusted gross income and is considered an advance payment of a refundable credit. If the taxpayer has not yet filed their 2019 tax return, the IRS will use their 2018 adjusted gross income to calculate their allowable credit.

Full terms of the rebate are discussed in §2201 of the CARES Act. Guidance on recovery rebates has also been issued by several Senators, including Ohio Senator Chuck Grassley, who co-authored the legislation. We’re answering some of the most common questions about the recovery rebate below, including who’s eligible, amounts and questions about dependents.

Rebate amounts and qualifications
Every United States resident or citizen who filed a tax return in 2018 or 2019 may be eligible to receive a recovery rebate under the CARES Act. Filers are eligible for a $1,200 rebate according to the following gross adjusted income parameters:

• $75,000 or less for single or married filing separately
• $112,500 or less for head of household filers
• $150,000 or less for married filing jointly

Individuals with no requirement to file a tax return also qualify for a rebate, provided they aren’t claimed as a dependent of another taxpayer and have a work-eligible Social Security Number (SSN). This includes seniors receiving social security, veterans on disability and similar. The IRS is not requiring those individuals to file a 2019 tax return to receive the credit. For filers exceeding the income thresholds above, recovery rebates decrease by $5 for every $100 of adjusted gross income:

• $99,000 maximum for single or married filing single with no children
• $146,500 maximum for head of household filers with no children
• $198,000 maximum for married filing jointly with no children

To estimate the amount of your rebate, please use this simple calculator. You can also refer to the graph below, provided by the Tax Foundation.

How are dependents qualified?
Taxpayers are eligible for an additional $500 per qualifying child. A typical family of four is eligible for a $3,400 recovery rebate; household incomes for a family of four exceeding $218,000 would not be eligible to receive a rebate.

A qualifying child is considered to be any child under the age of 17, claimed as a dependent on another’s taxes. Dependents age 17 or overdo not qualify for a $500 additional rebate. Those who file a tax return but are considered a dependent of another—like a college student—are not eligible for a rebate.

What if I don’t qualify?
If your gross adjusted income in 2019 (or 2018 if you have not yet filed) exceeded eligibility levels, you may still receive a partial rebate based on your 2020 tax return. This rebate acts as an advance on a tax credit against your 2020 tax return. If your income is lower in 2020, you’ll be refunded the additional credit or can apply it to reduce your tax liability when you file next year’s tax return. Conversely, overpayments due to higher 2020 income won’t be clawed back.

How do I receive my rebate?
Most taxpayers don’t need to do anything. Recovery rebate checks will be direct-deposited using bank information from the 2019 or 2018 tax return or issued via check in the same fashion as a tax return. Currently there is no deadline on issuance of recovery rebates; however it’s likely we’ll see them mid-to-late April. The IRS also promises to provide a web-based portal for individuals to provide their banking information to the IRS online.

Individuals who haven’t filed a 2018 or 2019 tax return are encouraged to do so as soon as possible.

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