How The Federal Reserve Fights Recessions
The U.S. central bank, the Federal Reserve, has a dual mandate: to work to achieve low unemployment and to maintain stable prices throughout the economy. During a recession, unemployment rises, and prices sometimes fall in a process known as deflation. The Fed, in the case of steep economic downturns, may take dramatic steps to suppress unemployment and bolster prices both to fulfill its traditional mandate and also to provide emergency support to the U.S. financial system and economy.
At the onset of a recession, some businesses begin to fail typically due to some combination of real economic shocks or economic bottlenecks that result from the incompatibility of production and consumption activities that results from previously distorted interest rate and credit conditions. These businesses lay off workers, sell assets, and sometimes default on their debts or even go bankrupt. All of these things put downward pressure on prices and the supply of credit to businesses in general, which can spark a process of debt deflation.
Which Tax Return Is Used For My Third Stimulus Check
The IRS uses 2019 or 2020 tax returns to determine eligibility for your third stimulus check. You should note that if your income fell in the 2020 tax year, filing your tax return earlier could help you qualify for a bigger third stimulus check. The new stimulus plan targets lower income ranges to exclude higher-earning taxpayers from getting a payment.
As we pointed out before, individuals making under $75,000 get the maximum stimulus payment of $1,400 . But payments are capped at $80,000 for single filers and $160,000 for couples. So filing at the beginning of the tax season with a lower income may help you qualify for a bigger check. But, if your income went up in tax year 2020, then you may want to delay filing so that eligibility is determined by your lower 2019 income.
You might also want to file early if the size of your family increased in 2020. The new stimulus plan includes a child tax credit that pays up to $3,600 for each qualifying child under 6 years old, and $3,000 for every child between ages 6 and 17. This means that if you became a parent during the tax year, you could get an additional payment by claiming your child as a dependent earlier.
SmartAssets child tax credit calculator will help you figure out how much you could get for each child.
You can use SmartAssets tax return calculator to figure out your 2021 tax refund or tax bill.
What To Expect From The New Stimulus Package
The new stimulus package provides much needed Covid-19 relief for families and businesses affected financially by the pandemic. How will you benefit from the latest round of Covid relief aid? Do you qualify for a $1,400 direct check? Read on to find out.
Key Points:
- The $1.9 trillion stimulus package will not hike the minimum wage.
- Those eligible will receive $1,400 direct stimulus checks.
- The relief package also includes an expanded child tax credit and an income tax credit.
- The unemployed will receive $300 weekly federal unemployment payments.
The package provides much-needed COVID-19 relief for families, businesses, schools, local governments, and vaccine distribution centers all over the nation.
How will you benefit from the upcoming round of pandemic relief aid? Do you qualify for a $1,400 direct check? Read on to find out.
Also Check: 3rd Stimulus Check When Will We Get It
How Much Does The Third Stimulus Check Pay
The $1.9 trillion coronavirus relief plan includes a third round of $1,400 stimulus payments, topping off the $600 checks that were , and adding up to $2,000.
Congress passed the coronavirus relief plan with targeted income limits for maximum stimulus payments to individual taxpayers earning under $75,000 and joint filers making up to $150,000. But whereas the first and second rounds of stimulus payments phased out checks on a sliding scale of $5 for every $100 over the income limit, the new plan cuts off high earners at $80,000 for individuals and $160,000 for couples.
Eligibility for the third stimulus checks is based on your tax filing status. For more information on who qualifies for a third stimulus check, our tables below will help you calculate different payment options.
Youll Avoid A Big Tax Bill If You Have Student Debt Forgiven
Democratic Senators slipped in a small but potentially major amendment to the bill that ensures any student loan borrowers who have debts forgiven through a one-time cancellation or through existing programs wont get hit with a big tax bill in the next five years.
The change applies to existing debt cancellation available through the governments income-driven repayment plans, which set monthly payments based on your earnings and offer forgiveness after a minimum of 20 years. But crucially, it also applies to any widespread debt cancellation that may come from the Biden administration.
The tax-free status covers any cancellation that happens between Jan. 1, 2021 and the end of 2025. Without the change, a borrower who had, say, $50,000 wiped out by the government would owe roughly a quarter of it back in taxes.
Debt forgiveness via the Public Service Loan Forgiveness program, which is offered to professionals like teachers and non-profit employees, is already exempt from taxes. So is any cancellation for students who were defrauded by their college. But the tax liability of future loan forgiveness from other programs has been a major, looming issue, according to borrower advocates, because of the increasing popularity of income-driven repayment plans.
Don’t Miss: Where Is My First Stimulus Check
Earned Income Tax Credit
For 2021, recent legislation nearly tripled the maximum Earned Income Tax Credit that grants low-income earners a tax break. The credit amount for workers who do not have children was increased from a maximum of $543 to $1,502. The age limit to claim the credit was also eliminated, now allowing all full-time students to capture the credit as well as anyone over the age of 65. This credit, however, does not apply to those who are retired collecting pensions and Social Security, etc., but it may apply if you have a part-time job.
Workers who do claim dependent children could see a refundable EITC of up to $6,728 in 2021 depending on filing status, income level, and number of children.
Since the EITC is based on earned income, the plan grants a temporary lookback provision to 2019 to calculate eligibility.
Will You Get A Stimulus Check
When will I get a second stimulus check? You may be asking the same question. Trumps executive orders did not include stimulus checks. If there will be a second round of stimulus payments, it will likely comes from Congress. Will there be a $1,200 stimulus check? There is bipartisan support in Congress for a $1,200 stimulus check, although there are four main plans for a second stimulus check. Trump also supports a second round of direct payments, and has said second stimulus checks could be more than than $1,200. Prior to the executive action, Congress agreed in principle to $1,200 stimulus checks on the same terms as the Cares Act, which was the $2.2 trillion stimulus package that included the first round of checks. Congress also agreed in principle to remove the age cap so that all dependents, including high school students, college students and adult dependents could qualify for dependent payments. However, following the executive action, Congress could pass standalone legislation for another round of checks or try for a comprehensive stimulus package with other high priority measures.
Recommended Reading: When Am I Getting My Stimulus Check
The House Approved The American Rescue Plan On Wednesday Sending The Sprawling Package To President Bidens Desk
The House passed a $1.9 trillion stimulus plan Wednesday, marking a major Democratic legislative victory aimed at boosting the economy and ending the pandemic.
The vast relief package, known as the American Rescue Plan, was approved on a 220-to-211 vote almost entirely along party lines. President Biden is expected to sign the legislation Friday.
The legislation will send $1,400 checks to most Americans, extend unemployment insurance and allocate billions of dollars for coronavirus testing. It is among the largest economic stimulus packages in U.S. history.
Heres a rundown of the American Rescue Plan:
How To Get The New Stimulus Payments
There isnt a difference between how youre going to get the new stimulus payments. Same as the previous one, your 2019 tax return will be taken into consideration. If you havent filed a 2019 tax return, then the 2018 tax return will be whats used when determining eligibility. If your income is less than $75,000 as single or $150,000 if married and filing jointly, you will get your stimulus payment automatically.
If you havent received your stimulus payment, you can check the status of it on the IRS website using the Get My Payment. Read more on how to check the status of stimulus payment.
Recommended Reading: Is The Government Giving Out Stimulus Checks
Your Obamacare Policy Will Become More Affordable
The new law will lower health insurance costs for millions of Americans who buy individual or family policies through the Affordable Care Act, also known as Obamacare. It will temporarily cap premium costs at 8.5% of income for all consumers, including those whose incomes fall above the threshold for government premium subsidies.
This means that consumers making more than 400% of the federal poverty level or $51,520 for an individual in 2021 will see their premium costs contained for the first time since the laws inception. Having to pay the full cost of coverage often put health insurance out of reach, even for more affluent households. Those with lower incomes who currently qualify for subsidies will receive even more assistance under the American Rescue Plan, lowering their premium costs further.
Older Americans pay the highest premium costs, so they will see the biggest savings under the bill. A 64-year-old with an income of $58,00 would save nearly $8,000 annually on premium costs, according to a Health Affairs analysis of Congressional Budget Office projections.
Whats more, under the new law the government will subsidize the cost of COBRA coverage through the end of September, so those who leave their jobs or are laid off dont need to pay full price to continue their employer-sponsored coverage through that time.
What The New Stimulus Package Means For You
According to the U.S. Bureau of Labor Statistics, the U.S. was still down 9.5 million jobs in February vs. the same time last year. This is despite a hopeful upturn in employment recently, thanks to the vaccine rollout and the leveling off of coronavirus cases in many areas.
In response, earlier this month Congress passed the $1.9 trillion American Rescue Plan . This new stimulus package focuses more on providing economic relief to households rather than businesses, like previous bills. As a result, economists predict the number of Americans living in poverty will drop by as much as a third. Especially for to low-income families and those whose earnings fluctuate from month to month.
âItâs a big deal,â David Wessel, director of The Hutchins Center on Fiscal and Monetary Policy at The Brookings Institution, told CBS News. âItâs one of the most significant steps weâve taken to life children out of poverty. In many other countries, the government subsidizes families with children because they are the ultimate investment in the future.â
The Tax Policy Center estimates the bill will result in a 20 percent increase in income for the bottom 20 percent of earners .
The ARP also includes aid to state and local governments, K-12 schools and colleges, and some businesses. It also provides billions of dollars to aid in the pandemic response. In addition, it offers a bailout for…
Also Check: Green Dot Stimulus Check 2021
Percent Coverage Of Cobra Premiums
The government will pay for all premiums of Americans who have been laid off and are relying on COBRA benefits for their health-care plans. These premiums are notoriously expensive: According to the Kaiser Family Foundation, the typical annual cost for individuals in 2020 was $7,470 and $21,342 for families.
What Do Election Results Mean For A Second Stimulus Package
— Election day has come and gone, and the country is still waiting to see whether Donald Trump or Joe Biden will be president for the next four years. As of Wednesday afternoon, multiple battleground states remained too close to call.
Despite the uncertainty, the stock market is once again reacting positively. The Dow Jones was up over 700 points early Wednesday afternoon. The S& P 500 and the NASDAQ, which is more technology-oriented, also showed significant gains in early trading. All three finished up for the day.
What does this stock market reaction mean in light of the 2020 election?
Investors like certainty. Yet, despite this truism, they’re pushing stocks up. That could change if the uncertainty drags on too long. With so many Americans voting and voting early, that is a possible scenario.
Investors are afraid of a protracted and contested sorting-out process, one that adds uncertainty to the market in these already uncertain times. A contested election, seen as a worst-case scenario, could lead to sharp swings in the market.
> > MORE: Stimulus Package Update: What Happens To The Economy Without A Second Stimulus?
Another aspect of the stock market’s positive reaction is the status of a second stimulus package. The election could help determine when such a package could pass and what form it will take.
> > READ:
Likewise, the Senate looks likely to remain under Republican control, with Susan Collins of Maine winning reelection and only five winners yet to be confirmed.
Also Check: I Have Not Got My Stimulus Check
What The City/region Will Get:
Local schools, transit agencies, and local governments, along with other groups, will get some money, too. Pennsylvania will receive an estimated $13.7 billion in state and local aid, with about $1.1 billion going to Philadelphia, and New Jersey will get $10.2 billion, the House Oversight Committee says.
K-12 schools in Pennsylvania, for example, will get about $5.1 billion in aid, as well as additional money for universities and colleges. New Jersey K-12 schools will get $2.7 billion. The bills enables schools to spend the money to hire staff, avoid layoffs, and perform upgrades to ventilation systems.
There is also help for renters. Pennsylvania will also get $670 million in emergency rental assistance, while New Jersey will receive $466 million. More than half of the populations of Philadelphia and Camden are renters, so that aid is essential to stem an eviction crisis, said Rachel Garland, managing attorney for the housing unit at Community Legal Services of Philadelphia.
The vaccine effort will also get money. Nationwide, there is about $14 billion earmarked for vaccines, and $7.6 billion to hire 100,000 public health workers to distribute them though details on how that money can be spent locally are currently unclear. But in Pennsylvania, there is $60 million in funding to help provide vaccine outreach and education to seniors, as well as meals and support for caregivers.
Hospitals Gets Their Wish: $100 Billion
What they got: Health care providers would secure $100 billion in grants to help fight the coronavirus and make up for dollars they have lost by delaying elective surgeries and other procedures to focus on the outbreak. They would also get a 20 percent bump in Medicare payments for treating patients with the virus.
Why it matters: This figure is exactly what three powerful groups representing physicians, hospitals and nurses had demanded, though for-profit hospitals were lobbying for much more. But there are still questions about whether there will be significant guardrails on how the money will be split up. The coronavirus will hit rural hospitals especially hard, since they already operate on thin margins and have limited staffing capacity. So some lawmakers have been working to ensure enough money goes to those sites.
CORONAVIRUS: WHAT YOU NEED TO KNOW
President Donald Trump and Melania Trump have tested positive for Covid-19.
Read Also: Stimulus Check Direct Deposit 2021
Read Also: Ww.irs.gov Where My Stimulus
Nol Carryback Period Extended To Five Years For Eligible
The provision was enacted as part of the American Recovery and Reinvestment Act of 2009 . On March 16, 2009, the Internal Revenue Service issued guidance on this new provision. Under the guidance, in order to use this special carryback, some taxpayers will need to make the election by April 17, 2009.
Telemedicine Investment: $200 Million
What they got: The Trump administration would get $200 million for boosting Skype-style health checkups by investing in services and devices that help health care providers connect remotely with patients.
Why it matters: The FCC helps run a rural health care program devoted to subsidizing the connectivity for health care providers, which gives it some stake in telehealth. The total jives with what FCC Chairman Ajit Pai requested earlier this month. This represents just the FCCs stake in telemedicine, not other parts of the government.
Read Also: How Do You Apply For Stimulus Check
Stimulus And Relief Package : The Cares Act
The thirdand largestrelief package was signed into law on March 27, 2020. By nominal dollar amount, it is the largest single relief package in U.S. history. This law, which is called the Coronavirus Aid, Relief, and Economic Security Act and nicknamed the CARES Act or Phase Three, appropriated $2.3 trillion for many different efforts:
- One-time, direct cash payment of $1,200 per person, plus $500 per child
- Expansion of unemployment benefits to include furloughed people, gig workers, and freelancers until Dec. 31, 2020
- Additional $600 of unemployment per week until July 31, 2020
- Waived early withdrawal penalties for 401s for amounts of up to $100,000 until Dec. 31, 2020
- Mortgage forbearance and a moratorium on foreclosures on federally-backed mortgages for 180 days
- $500 billion in government lending to companies affected by the pandemic
- $367 billion in loans and grants to small businesses through the PPP and the expanded Economic Injury Disaster Loan program
- More than $130 billion for hospitals and healthcare providers
- $150 billion in grants to state and local governments
- $40 billion for schools and universities
Benefits provided to unemployed individuals under the CARES Act expired on Sept. 5, 2021. These programs include the Pandemic Unemployment Assistance , the Pandemic Emergency Unemployment Compensation , and the Federal Pandemic Unemployment Compensation .