On December 27th, President Trump signed the Consolidated Appropriations Act, 2021 (CAA) into law. One of the provisions of this act provides for additional Economic Impact Payments to be made to taxpayers beginning in January 2021. The amount of these payments are based on information reported on 2019 tax returns. The maximum payment that can be received is $600 for a single taxpayer and $1,200 for married couples. In addition, taxpayers are eligible for an additional payment of $600 per dependent child under 17 years old.
Single taxpayers who reported modified adjusted gross income greater than $75,000 ($112,500 for heads of household and $150,000 for married filing joint taxpayers) will be subject to a phase out of the credit. The phase out provisions will decrease the amount of the payment by $5 for every $100 of income in excess of these thresholds.
The amount of the payment that each taxpayer should be eligible for will be recalculated on the 2020 income tax return. If the credit determined on the taxpayer’s 2020 tax return exceeds the amount of the advance payment, the taxpayer will receive the difference as a refundable tax credit. Taxpayers who receive an advance payment in excess of the credit are not required to repay the excess.
If you have further questions or need additional information on this subject, please give us a call in our Celina or Coldwater offices.