If you’re one of the lucky Americans who got a stimulus check recently, you may be wondering whether your money is taxable. And if it’s not taxable, what exactly does that mean? Well, we’re here to help! We’ll walk you through some of the most common questions we’ve seen about taxes and financial assistance over the past few years—questions like “Are my stimulus checks taxable?” and “What are some ways I can legally avoid paying taxes?”
If you receive a stimulus check, unemployment benefits or other government checks to pay for necessities such as utilities, food, health care or housing, these payments are not taxable.
If you receive any other types of government checks that are not used to pay for these necessities — such as a refund from the IRS — they may be taxable. Be sure to consult your accountant if you have questions about your taxes.
The IRS has a special rule for determining whether unemployment benefits are taxable. If your total income, including unemployment benefits, was more than $15,000 in 2019 or in 2018 (or the combined total of both years), the amount of unemployment benefits you received is taxable. This is true even if you did not have any other income during those years and even if you may have received all or most of your Social Security payments as lump sums during those years (which would normally be nontaxable).
Stimulus Check Tax Is For Real?
Under the new law, there is a one-time $10,200 tax break for people who earned less than $150,000 in 2021. The tax break applies to the first $10,200 of taxable income you earned and it’s not available if you claimed either a tax credit or deduction during your 2019 return.
If you don’t qualify for this credit and haven’t used up all of your standard deductions yet—the amount that reduces your taxable income by about $12,000 on average—that might make sense depending on your circumstances. But if those aren’t an issue and you’re planning to itemize anyway (which generally means leaving more money on the table), then it may be worth waiting until 2021 when there will be no additional benefits from claiming them now.”