The Stimulus Bill And You
Stimulus Checks, Student Loan Holidays, And Incentives For Charitable Giving
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Last Friday, Congress passed of the $2.2 trillion stimulus bill, the largest in US history. For most Americans, the immediate impact is a $1200 per person and $500 per child stimulus check sent (or electronically deposited) starting in the next few weeks.[1] Many will also benefit from a six-month suspension of federal (not private) student loan payments, with no interest accruing.[2]
But the most important items are increased unemployment benefits for the millions (and more likely tens of millions) of Americans who have lost or will lose their jobs in the next several weeks, and hundreds of billions of dollars of loans and grants to affected companies.
During this time, more people need assistance than ever, and the stimulus bill encourages charitable giving by allowing you to deduct up to $300 in charitable contributions per year, even if you claim the standard deduction on your tax return. After the passage of the Tax Cuts and Jobs Act of 2017 about 90% of Americans (us included) claim the standard deduction rather than itemizing, meaning that we lost our ability to deduct any charitable contributions on our tax return.
With this change, taxpayers claiming the standard deduction can deduct up to $300 of 2020 charitable contributions when they file their tax return next year. For most Americans, this means you get a tax benefit worth about $70 if you donate $300 to charity.[3]
If you haven’t made any charitable contributions this year, a great way to take advantage of this benefit is to donate to a charity helping victims of the outbreak. Or, if you’ve already made charitable donations this year and can’t afford to give more, make sure to keep receipts of your 2020 donations so you can take advantage of this savings.
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[1] If you earn more than $75,000 in annual income ($150,000 for joint filers) your check will be reduced, and it will phase out entirely at $99,000 in income ($198,000 for joint filers)
[2] Those on loan forgiveness programs appear to get an even better deal - no payments for six months, with those months treated as full payments for purposes of meeting any requirements under a payment plan. The NYTimes FAQ on the stimulus bill has more details.
[3] This assumes you are in the 22% or 24% tax bracket (higher earners may be in a higher bracket, lower earners may be in a lower one).