Stimulus Check Update: How Much Money Will New Parents Receive?
(CBS Detroit) -- Kids are expensive. From diapers and daycare to clothes and college, the costs add up, and they add up fast. For parents who have lost jobs because of the pandemic, those costs become all the more burdensome given the loss of income. But new parents may be able to catch a break. Parents of children born in 2020 are eligible for stimulus payments covering their dependents, if they meet the income requirements.
>>READ: Stimulus Check Latest: Will You Receive A Third Payment Later This Year?
The $2.2 trillion CARES Act, passed back in March, provided $1,200 stimulus payments for adults and $500 for dependents under the age of 17. The $900 billion second stimulus package, passed at the end of December, includes $600 payments for adults and $600 more for dependents.
Both stimulus payments are subject to income requirements that kick in above $75,000 in adjusted gross income for individuals, $112,500 for heads of household and $150,000 for married couples filing jointly. Above those amounts, the stimulus payment is reduced by $5 for every $100 of annual income until it phases out entirely. So an individual who earned $87,000 received $600 of the initial $1,200 stimulus but would receive $0 of the latest $600 stimulus. A married couple filing jointly who earned $174,000 received $1,200 of the initial $2,400 ($1,200 X 2), but would receive $0 of the latest $1,200 ($600 X 2).
The math changes a little for people with dependent children. The child's stimulus payment, which gets lumped in with the parent's or parents', doesn't begin to phase out until the adult's or adults' reaches zero. So a person with a dependent child, earning $87,000 per year should have received an $1,100 stimulus payment ($600 + $500) the first time around and should receive $600 ($0 + $600) this time around. A married couple, with a dependent child, earning $174,000 should have received $1,700 ($1,200 + $500) the first time and $600 ($0 + $600) this time. Individuals and couples, with dependents, who earn more will see their child's payment decrease at the same rate of $5 for every additional $100 of income.
Parents of children born in 2020 probably didn't receive the child's portion of the first stimulus payment. They may not have even had a child yet back in the spring. At that time, with the coronavirus raging and the economy in freefall, the government put money in people's pockets based on the information they had. That means the IRS issued payments based on the most recent tax year for which taxpayers had filed. At the time, it would have been 2019 or even 2018, given that the filing deadline was moved from April to July this past year. Tax information from those years would not reflect a child born in 2020.
A similar set of circumstances applies to the stimulus payments being issued now. The 2020 tax year just ended, and very few people have filed their taxes. So, for a new parent, the most recent information the IRS has is likely 2019, which doesn't show a dependent child. Their stimulus payment won't include an extra $600, just as it didn't include an extra $500 before.
So how can parents of dependent children born in 2020 claim their additional stimulus money? They have to file their 2020 taxes and claim any missing payments as a Refund Recovery Credit. (The same goes for parents of 2019 babies who missed out on the first stimulus check.) The credit will then be added to your 2020 refund or counted against whatever you owe.
>>READ: Stimulus Package Update: When Will The Checks Start Arriving?