You won’t have to pay back your stimulus check, even if you get too much

You don’t have to repay your stimulus check. Song_about_summer/Shutterstock
  • For most Americans, stimulus payments are based on adjusted gross income reported on 2018 and 2019 tax returns.
  • The payment is technically an advance on a tax credit that offsets your 2020 tax liability, but don’t let that confuse you.
  • The cash payment is nontaxable government aid – you won’t have to repay any part of your stimulus check, even if you get too much.
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Some 80 million Americans will have stimulus payments deposited into their bank accounts this week.

The one-time cash payments are meant to relieve some of the financial strain caused by the coronavirus pandemic by paying individuals up to $US1,200 and married couples up to $US2,400; parents get an additional $US500 for each child 16 and under.

If the IRS doesn’t have your direct-deposit information but you qualify for a payment, you’ll be getting a check in the mail over the next few months.

The payment – which the IRS calls an “economic impact payment,” the government calls a “recovery rebate,” and many people call a “stimulus check” – may look and feel like a tax refund, but it’s different. And it’s definitely not a loan.

The payments are no-strings-attached government aid that you won’t need to repay, even if you get too much. There’s no clawback provision in the CARES Act that enables the IRS to demand repayment of recovery rebates.

You don’t have to pay back your stimulus check, because it’s a refundable tax credit

Your stimulus payment is technically a refundable tax credit, which reduces your 2020 tax bill on a dollar-for-dollar basis. It’s like having store credit at your favourite clothing shop: When you apply it to your total bill, it reduces what you owe. In this case, even if you have no tax liability, the government is “refunding” your credit back to you as a cash payment.

You usually can’t claim a tax credit until you file your taxes, since you don’t know what you owe until the year is over. Because of the severity of this national crisis, the government is giving qualifying taxpayers their credit early in the form of a cash payment. It’s an advance of a refundable tax credit – not an advance of your tax refund itself. It will not lower your tax refund this year or next year.

Even though the credit is technically offsetting your 2020 tax liability, the payments for most people are calculated based on the adjusted gross income reported on their 2019 tax return, or 2018 if they haven’t filed yet, because that’s the most readily available income data.

What all this means is that you could get more than what you qualify for based on your 2020 income and the government isn’t going to come after you to settle the score. For example, if your 2020 AGI is too high – $US99,000 for individuals and $US198,000 for married couples who file jointly – but your 2018 or 2019 income is within the limits, you’ll receive a payment.

If the opposite happens to be true – your 2019 or 2018 income disqualified you from getting a payment but your 2020 income is within the limits – you should be able to get your full check when you file your 2020 tax return next year.