What Should You Do With Your Stimulus Check?

By Rachel Sanborn Lawrence

For most Americans, the CARES Act — a $2 trillion economic stimulus package passed by the government on March 27 — will provide them with a $1,200 check to help ease the impact of the coronavirus pandemic.

An illustration of a check for $1,200, made out to you.

While $1,200 can only go so far in a situation like this, every dollar does help. Here’s what you need to know about the policy and advice on the best way to use it, depending on your financial situation.

Stimulus check FAQs

Who’s eligible for a stimulus check?

It depends on your annual income. If you make $75,000 or less as a single tax filer ($150,000 or less if you’re married filing jointly, and $112,500 or less if you file as head of household), you’ll get the full $1,200. Families will get an extra $500 for each child under 17.

If you make more than that per year, you’ll get a reduced payment — $5 less for every extra $100 of income you make. If you make more than $99,000 ($198,000 if you’re married filing jointly, and $136,500 if you file as head of household), you won’t be eligible for the payment.

If you make too much to be eligible for the individual payment, you can still qualify for the $500 payment per child. That credit will be reduced beginning at the higher $99,000 / $198,000 / $136,000 limit — again, $5 less for every $100 you make.

Non-citizens without green cards (technically called “nonresident aliens”) and people who are claimed as dependents on someone else’s tax return also aren’t eligible.

Which year’s income are they looking at?

Technically, this is all based on your 2020 income, because it’s affecting your 2020 income. But since nobody knows what that will be yet, the government’s going to use your 2019 tax return — or 2018’s if you haven’t filed yet — to estimate it.

The deadline to file your 2019 tax return is July 15, 2020. If it turns out you made less in 2019 than you did in 2018, the government will take it as a more realistic estimate of your 2020 income and adjust accordingly. You’ll see any extra as a 2019 tax refund. But if you end up having made more in 2019, they won’t ask for any money back.

So far, there aren’t any immediate solutions in place for people who made more than the limit on their last tax return but lost their job in 2020. They would get a refund on their 2020 taxes, but that’s pretty far away. It’s possible the government might announce something, but they haven’t yet.

Do you have to pay taxes on it?

Nope. It’s also not an “advance” on any future tax refunds; it’s effectively just money in your pocket.

How and when will the payments come?

The IRS started sending payments the week of April 13. If they have your bank account info (like if you’ve given it to them when you filed taxes in the past), they’ll send you the money via direct deposit. If they don’t have your bank info on file, they’ll mail you a check. That will take longer than the direct deposits. You can check on the status of your payment using the IRS’s online tool here.

How to use the money

What’s the best way to use that stimulus check, if you get one? That’s a good question, and it depends on your financial situation right now.

If you or a loved one need it to pay the bills

Use it. That’s what it’s for.

But before you use it — especially if you lost your job — see if you can get those bills you owe reduced. A lot of banks and credit card providers, in particular, are very understanding right now. They might be willing to put you on an adjusted payment plan or pause your payments if you ask.

If you’re still working but living paycheck to paycheck, here’s some advice that might help.

If you don’t need to use it right away

Consider giving yourself permission to spend a little bit of it — maybe 10–15% — on something that will make your life easier or happier during these stressful times, like a couple of nights of takeout from a local restaurant. If you can, you might also consider donating some of it to a non-profit to help others affected by the pandemic.

If you believe your income is in jeopardy

Save the rest. Put it in a liquid (easy to access), safe (FDIC- or NCUA -insured) bank account.

If you believe your income is safe, and you have debt with interest rates of 10% or more

Use it to pay off some of that debt. It might feel safer to save it, but think about it this way: Every single day that your debt goes unpaid, it’s costing you a lot of money in interest. You can use your credit card again later if something does happen to your income — but you might as well cut down on the amount of compound interest you’re accumulating between now and then.

If all else is OK, and all your debt has interest rates less than 10% (or if you have no debt)

Save it. We do typically say that you should try to pay off debt with interest rates between 5% and 10%, too, but there’s a lot of uncertainty in the world right now. Let this be the start of (or an addition to) your emergency fund.

If you have no debt and a full-up emergency fund

You are fortunate in these times. If you have a strong financial foundation in place, we recommend investing the money, spread across several deposits. This is called dollar-cost averaging, and it means you won’t have to guess about when the best time might be. You’ll get into the markets on some up days and some down days, and you’ll pay an average price over time.


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Rachel Sanborn Lawrence

Rachel Sanborn is the Director of Advisory Services at Ellevest and a CFP® Professional. She oversees Ellevest’s coaching teams and works with Ellevest members to help them be the boss of their money.