If you received stimulus payments from the IRS in 2020, you might be wondering if you have to pay it back during tax season. As a brief reminder, in 2020 millions of Americans received stimulus payments to help them during the coronavirus pandemic. The amount of the payments varied depending on adjusted gross income for 2019 (or 2018).
According to the IRS, the short answer is no; you will not need to pay back your stimulus payment.1
Read on to learn more about why you don’t need to repay your stimulus check during tax season.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors.
Why You Won’t Have to Pay Back Your Stimulus Payment
The reason why you won’t have to pay back any stimulus money you received is because those funds are technically considered a special tax credit for the 2020 tax year. This means that the funds are not included in your gross income for 2020, and you do not need to repay all or part of your payment.1
Another example of a tax credit is the earned income credit (EIC). EIC helps low-income taxpayers reduce their tax bill or even reduce their tax amount to zero by giving individuals or families a refundable tax credit.
Your Stimulus Payment Is Not Taxable Income
The IRS has stated that funds from your stimulus payments are not includible in your gross income.1 These funds are nontaxable.
What if My Income Dropped in 2020?
Suppose that the amount of gross income you earned fell in 2020 due to the coronavirus pandemic and that your stimulus payment was reduced based on your 2019 adjusted gross income (or 2018 income, if you did not file your 2019 income tax return). In that case, you may be eligible to receive the difference between what you received and the full payment when you file your 2020 tax return.3 For instance, if you earned $76,000 in 2019 as a single filer, you would have received a stimulus payment of about $1,150. But let’s say in 2020 your income fell to $40,000. Now, you qualify for the full recovery tax rebate of $1,200. When you file your 2020 tax return, you should receive the excess $50. Conversely, if your income went up in 2020, you will not have to give back any part of a stimulus payment that you already received.3
Conclusion
If you received a stimulus payment this year and are worried about having to pay all or part of it back during tax time, don’t panic. You won’t have to pay back any money you received from the IRS during tax season.
