Refunds for $10,200 Unemployment Tax Break to Begin This Week

If you received unemployment benefits last year and filed your 2020 tax return relatively early, you may find a check in your mailbox soon (or a deposit in your bank account). Starting in mid-May, and extending through the summer, the IRS will automatically issue tax refunds to those Americans who filed their 2020 return and reported unemployment compensation before tax law changes were made by the American Rescue Plan.

Signed on March 11, the American Rescue Plan exempts from federal tax up to $10,200 of unemployment benefits received in 2020 ($20,400 for married couples filing jointly) for households reporting an adjusted gross income (AGI) less than $150,000. The IRS has identified over 10 million people who filed their tax returns before the plan became law and is reviewing those returns to determine the correct amount of tax on their unemployment compensation. For those affected, this could result in a refund, a reduced tax bill, or no change at all. (You can use the IRS’s Interactive Tax Assistant tool to see if payments you received for being unemployed are taxable.)

The IRS will recalculate impacted tax returns in two phases. First, it will start with returns for single taxpayers who had the simplest tax returns, such as those filed by people who didn’t claim children as dependents or any refundable tax credits. It will then adjust returns for married couples filing jointly who are eligible for an exemption up to $20,400 and others with more complex returns.

The new tax exemption only applies to unemployment benefits received in 2020. So, if you receive unemployment compensation in 2021 or beyond, expect to pay federal tax on the amount you get.

As for state taxes, just because the federal government is waiving taxes on the first $10,200 of your 2020 unemployment benefits, that doesn’t mean your state will too. To see if your state has adopted the federal exemption for 2020 state tax returns, see Taxes on Unemployment Benefits: A State-by-State Guide.

Refunds for Unemployment Compensation

If you’re entitled to a refund, the IRS will directly deposit it into your bank account if you provided the necessary bank account information on your 2020 tax return. If valid bank account information is not available, the IRS will mail a paper check to your address of record. The IRS says it will continue to send refunds until all identified tax returns have been reviewed and adjusted.

The IRS will send you a notice explaining any corrections. Expect the notice within 30 days of when the correction is made. Keep any notices you receive for your records, and make sure you review your return after receiving an IRS notice.

The refunds are also subject to normal offset rules. So, the amount you get could be reduced (potentially to zero) if you owe federal tax, state income tax, state unemployment compensation debt, child support, spousal support, or certain federal non-tax debt (i.e., student loans). The IRS will send a separate notice to you if your refund is offset to pay any unpaid debts.

Should I File an Amended Return?

Although the IRS says there’s no need to file an amended return, some early filers may still need to, especially if their recalculated AGI makes them eligible for additional federal credits and deductions not already included on their original tax return.

The IRS, for example, can adjust returns for those taxpayers who claimed the earned income tax credit and, because the exemption changed their income level, may now be eligible for an increase in the tax credit amount which may result in a larger refund. That said, taxpayers will need to file an amended return if they didn’t originally claim the tax credit, or other credits, but now are eligible because the exclusion changed their income, the IRS said. These taxpayers may want to review their state tax returns as well.

Withholding from Unemployment Compensation

Again, the $10,200 exemption only applies to unemployment compensation received in 2020. So, to avoid a big tax bill when you file your 2021 return next year, consider having taxes withheld from any unemployment payments you receive this year.

Contact your state unemployment office to have federal income taxes withheld from your unemployment benefits. You may be able to use Form W-4V to voluntarily have federal income taxes withheld from your payments. However, check with your state to see if it has its own form. If so, use the state form instead.

Excess Premium Tax Credit Payments

The American Rescue Plan also suspends the requirement to repay excess advance payments of the premium tax credit. If you repaid any excess credit when you filed your 2020 return, the IRS is also refunding this amount automatically. If the IRS corrects your return to reflect the unemployment compensation exclusion, any excess premium tax credit amount you paid will be included in the adjustment. The IRS is also adjusting returns for people who repaid excess premium tax credits but didn’t report unemployment compensation on their 2020 tax return.

Source: kiplinger.com

IRS Gives Truckers a Tax Break in Response to the Colonial Pipeline Shutdown

In response to the supply chain disruptions created by the Colonial Pipeline shutdown, the IRS is temporarily suspending the penalty for selling or using dyed diesel fuel for highway use in Alabama, Delaware, Georgia, Florida, Louisiana, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and the District of Columbia.

Normally, dyed diesel fuel is not subject to the 24.4¢ per gallon tax that is normally applied to diesel fuel for highway use because it’s only sold for tax-exempt uses, such as for farming, home heating, and local government purposes. (The fuel is dyed – often red – to distinguish it from taxable fuel.)

The penalty is typically imposed if:

  • Any dyed fuel is sold or held for sale for a use the person knows or has reason to know isn’t a nontaxable use of the fuel;
  • Any dyed fuel is held for use or used for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed;
  • The strength or composition of any dye in dyed fuel is willfully altered, or there is an attempt to alter it; or
  • Altered fuel is knowingly sold or held for sale for any use that isn’t a nontaxable use of the fuel.

The penalty is $1,000 or $10 per gallon of the dyed diesel fuel involved, whichever is higher. For multiple violations, the $1,000 portion of the penalty increases depending on the number of violations.

The penalty relief is retroactive to May 7, 2021, and will remain in effect through May 21, 2021. It’s available to any person that sells or uses dyed diesel fuel for highway use. In the case of the operator of a vehicle in which the dyed diesel fuel is used, the penalty relief is available only if the operator or the person selling the fuel pays the 24.4 cents per gallon tax that is normally applied to diesel fuel for highway use. The IRS also won’t impose penalties for the failure to make semimonthly deposits of this tax.

Source: kiplinger.com

5 States With No State Sales Tax

Many people don’t factor in sales taxes when they’re looking at the tax-friendliness of different states. That’s a mistake. Forty-five states plus the District of Columbia impose a sales tax. In addition, local sales tax is collected in 38 states. The combined state and local levy can be hefty, too. In fact, in Tennessee (which took the top spot in our round-up of the 10 States With the Highest Sales Tax), the average combined state and local sales tax is 9.55%, according to the Tax Foundation. That’s a big bite out of your wallet every time you make a purchase.

On the flip side, for states that don’t impose a sales tax — Alaska, Delaware, Montana, New Hampshire and Oregon — residents are often hit hard with other taxes (like income or property taxes). Afterall, money for roads and schools has to come from somewhere. New Hampshire, for example, has some of the highest real estate taxes in the country. In Oregon, income tax rates can be as high as 9.9%, which is the fourth-highest top rate in the nation. 

The information below will help you understand more about what you will really pay to live in the five states with no sales tax. For each state, we’ve also included a link to our full guide to state taxes for middle-class families to help you put these shopping destinations in perspective.

Income tax brackets are 2020 values, unless otherwise noted. Property tax values are for 2019, the most recent data available.

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Alaska

The state of Alaska.The state of Alaska.

Overall Rating for Middle-Class Families: Most tax-friendly

Sales Tax: While the Last Frontier has no state sales tax (or else it wouldn’t be on this list), localities can levy sales taxes, which can go as high as 7.5%. But, according to the Tax Foundation, the statewide average is only 1.76%. That’s the lowest combined average rate for states that impose either state or local sales taxes.

Income Tax Range: No state income tax.

Property Taxes: In Alaska, the median property tax rate is $1,182 per $100,000 of assessed home value, which is above the national average.

For details on other state taxes, see the Alaska State Tax Guide for Middle-Class Families.

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Delaware

The state of Delaware.The state of Delaware.

Overall Rating for Middle-Class Families: Most tax-friendly

State Sales Tax: Delaware has no state or local sales taxes. It’s interesting to note that, in response, New Jersey halved its sales tax in Salem County, which borders Delaware.

Income Tax Range: Low: 2.2% (on taxable income from $2,001 to $5,000). High: 6.6% (on more than $60,000 of taxable income). The top rate is middle-of-the-road when compared to other states. Wilmington also imposes a city tax on wages.

Property Taxes: For Delaware homeowners, the median property tax rate is $562 per $100,000 of assessed home value — the lowest among the states featured on this list.

For details on other state taxes, see the Delaware State Tax Guide for Middle-Class Families.

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Montana

The state of Montana.The state of Montana.

Overall Rating for Middle-Class Families: Tax-friendly

State Sales Tax: No state sales tax, but some resort destinations such as Big Sky, Red Lodge and West Yellowstone have local sales taxes.

Income Tax Range: Low: 1% (on up to $3,100 of taxable income). High: 6.9% (on more than $18,700 of taxable income).

Starting in 2022, the top rate will be 6.75% on taxable income over $17,400. Then, beginning in 2024, the income tax rates and brackets will be substantially revised (there will only be two rates – 4.7% and 6.5%).

Property Taxes: For homeowners in Montana, the median property tax rate is $831 for every $100,000 of assessed home value. 

For details on other state taxes, see the Montana State Tax Guide for Middle-Class Families.

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New Hampshire

The state of New Hampshire.The state of New Hampshire.

Overall Rating for Middle-Class Families: Mixed tax picture

State Sales Tax: None.

Income Tax Range: New Hampshire doesn’t have an income tax. But there’s a 5% tax on dividends and interest in excess of $2,400 for individuals ($4,800 for joint filers).

Property Taxes: The median property tax rate in New Hampshire is $2,050 for every $100,000 of assessed home value. 

For details on other state taxes, see the New Hampshire State Tax Guide for Middle-Class Families.

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Oregon

The state of Oregon.The state of Oregon.

Overall Rating for Middle-Class Families: Not tax-friendly

State Sales Tax: None.

Income Tax Range: Low: 4.75% (on up to $7,200 of taxable income for married joint filers and up to $3,600 for single filers). High: 9.9% (on more than $250,000 of taxable income for married joint filers and more than $125,000 for single filers). Dollar figures for 2020 are not available yet, so 2019 amounts are shown.

A “kicker” tax credit may be available on tax returns for odd-numbered years. The credit is authorized if actual state revenues exceed forecasted revenues by 2% or more over the two-year budget cycle.

Property Taxes: The median property tax rate for Oregon homeowners is $903 per $100,000 of assessed home value.

For details on other state taxes, see the Oregon State Tax Guide for Middle-Class Families.

Source: kiplinger.com

Where Is My Tax Refund? Why You’re Still Waiting and What to Do

Chances are you’ve gotten your third stimulus check by now, but you may still be waiting on that other chunk of change the IRS owes you: your tax refund. 

The IRS is sitting on a backlog of 29 million returns that require manual processing, which basically means that a human needs to review it. 

To be clear, most taxpayers who e-file have their returns processed and receive their refunds within 21 days, according to the IRS. But if you’re still waiting and wondering “where is my tax refund?”, here’s what’s going on and how you can track it.

Why You Haven’t Received Your Tax Refund

The 2020 tax season has been an especially complicated one for IRS staff and accountants.

As of March, the IRS still had a backlog of more than 2 million returns from 2019. Most of them are leftover returns filed by mail that piled up last year when most IRS offices were temporarily shuttered due to COVID-19.

But on top of that, there are a number of complexities created by the three stimulus bills, the most recent of which passed in the middle of tax season. On top of the usual tax season mayhem, the IRS was tasked with delivering the third stimulus check. Plus, tax season started 16 days later than usual this year. These challenges prompted the IRS to extend the tax deadline to May 17. 

For example, people who typically qualify for the Earned Income Tax Credit, a credit for low- and middle-income working families, may not have been eligible in 2020 due to expanded unemployment benefits. The $900 billion stimulus package that passed in December changed the rules to allow families to use 2019 income to qualify instead of 2020 income. 

However, the IRS didn’t have time to update its programs to reflect this change, so if you’re seeking the Earned Income Tax Credit based on 2019’s income, an IRS employee will need to manually review it.

The same applies if you qualify for stimulus money from the first two checks based on your 2020 return that you didn’t qualify for based on your 2019 or 2018 return. For example, if your 2019 income was higher than your 2020 income, you may qualify for more stimulus money. Or if you had a child in 2020, you’d get stimulus credits on their behalf. These situations also require a manual review.

But your tax refund could also be delayed for all the reasons that would apply in a normal year. For example, if your refund was sent to a bank account that you’ve since closed, the IRS will eventually cut you a paper check, but that adds to the wait time. If someone fraudulently filed a tax return in your name to steal your refund, the IRS will think that you’ve already filed and reject it. Your refund will also be delayed if you made an error or your return was incomplete.

If you owe certain types of debt like child support or back taxes, the IRS could take your refund and use it to offset what you owe.

Paper returns require manual processing, so if you’ve filed by paper, expect a long wait, even if there are no issues with your return. The IRS is urging taxpayers who have yet to submit their returns to file online instead of by mail.

If you made an error that requires an amended return, your tax season will be even more prolonged. The IRS will notify you of the error by mail, and you’ll have to send in Form 1040X. There’s only one way to do this: by mail. Then, your amended return will be added to the 29 million-plus unprocessed returns.

What to Do if You’re Still Waiting

The first step is to make sure the IRS has actually received your return. 

You can track your return using the Where’s My Refund feature on the IRS website or the IRS2Go app. You’ll need to provide your Social Security number, filing status and your exact refund amount.

But these tools have limited usefulness. If your return has been processed, they tell you when your refund is scheduled for deposit, but they don’t provide information about why a return is still being processed or whether you need to provide additional information, which prompted recent criticism from the Taxpayer Advocate Service.

If you filed electronically, you should be able to see whether the IRS has accepted your return within 24 hours. If the IRS has accepted your return, that just means it has confirmed it received it. The IRS still has to process it. 

If you sent a paper return, you can expect a long wait before you can confirm that the IRS even has your return. Even in normal circumstances, tracking a paper return can take about four weeks.

The IRS says its staff will help you research the status of your refund only if you filed electronically more than three weeks ago or sent it by mail at least six weeks ago, or if Where’s My Refund tells you to get in touch. 

Considering that the IRS has only answered about 7% of individual taxpayer phone calls to date, it’s pretty tough to talk to a human. Even if you’re one of the lucky ones who gets through to a human, they probably won’t be able to give you much information. The IRS systems don’t tell employees who handle phone calls why a return required manual processing. But if you want to try, the number for checking the status of a refund is 800-829-1954.

What to Do if You Haven’t Filed Yet

The big takeaway if you haven’t filed yet: Filing electronically is the way to go. There are plenty of easy-to-use tax software options, many of which have free versions.

Not only will you get your refund faster, but you’re also less likely to make errors that could result in further delays because the software is doing the math for you. Additionally, filing electronically is more secure than putting all that personal information in an envelope.

And of course, the sooner you file, the better. It usually takes longer to get your refund as Tax Day approaches, so stop delaying and block off time for a date with your tax software of choice.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]

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Source: thepennyhoarder.com

10 States With the Highest Sales Taxes

Before you embark on a shopping spree in any of the 10 worst states for sales taxes featured here, you’ll want to make extra room in your budget. Our biggest offender clocks in at 9.55% once both state and local sales taxes are factored in (continue reading our round-up to find out which state is the priciest culprit).

However, retirees and other relocators shouldn’t judge a state by its sales tax alone. While this expense may be costlier in some areas, residents in states with a high sales tax may be able to reap the benefits of other tax-related perks, such as not having to pay state income tax.

Got your attention? Take a look at our list to find out which states will nickel-and-dime you the most on everyday purchases.

Sales tax values are for 2020 and were compiled by the Tax Foundation. Income tax brackets are for the 2020 tax year. Property tax values are for 2019.

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10. New York

The state of New York.The state of New York.

Overall Rating for Middle-Class Families: Least tax-friendly

State Sales Tax: 4% state levy. Localities can add as much as 4.875%, and the average combined rate is 8.52%, according to the Tax Foundation. In the New York City metro area, there is an additional 0.375% sales tax to support transit. Clothing and footwear that cost less than $110 (per item or pair) are exempt from sales tax. Groceries and prescription drugs are exempt, too. Motor vehicle sales are taxable, though.

Income Tax Range: Low: 4% (on up to $8,500 of taxable income for single filers and up to $17,150 for married couples filing jointly); High: 8.82% (on taxable income over $1,070,550 for single filers and over $2,155,350 for married couples filing jointly).

Starting in 2021, the top rate is 10.9% on taxable income over $25 million (regardless of filing status).

New York City and Yonkers imposed their own income tax. A commuter tax is also imposed on residents of New York City, as well as on residents of Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester Counties.

Property Taxes: In the Empire State, the median property tax rate is $1,692 per $100,000 of assessed home value. 

For details on other state taxes, see the New York State Tax Guide for Middle-Class Families.

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9. California

The state of California.The state of California.

Overall Rating for Middle-Class Families: Most tax-friendly

State Sales Tax: 7.25% state levy. Localities can add as much as 2.5%, and the average combined rate is 8.68%, according to the Tax Foundation. Groceries and prescription drugs are exempt from these taxes, but clothing and motor vehicles are taxed. 

Income Tax Range: Low: 1% (on up to $17,864 of taxable income for married joint filers and up to $8,932 for those filing individually); High: 13.3% (on more than $1,198,024 for married joint filers and $1 million for those filing individually).

Property Taxes: If you’re planning to buy a home in the Golden State, the median property tax rate is $729 per $100,000 of assessed home value. 

For details on other state taxes, see the California State Tax Guide for Middle-Class Families.

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8. Kansas

The state of Kansas.The state of Kansas.

Overall Rating for Middle-Class Families: Least tax-friendly

State Sales Tax: 6.5% state levy. Localities can add as much as 4%, and the average combined rate is 8.69%, according to the Tax Foundation. These rates also apply to groceries, motor vehicles, clothing and prescription drugs. 

Income Tax Range: Low: 3.1% (on $2,501 to $15,000 of taxable income for single filers and $5,001 to $30,000 for joint filers); High: 5.7% (on more than $30,000 of taxable income for single filers and more than $60,000 for joint filers).

Property Taxes: Kansans who own their homes pay a median property tax rate of $1,369 per $100,000 of assessed home value. 

For details on other state taxes, see the Kansas State Tax Guide for Middle-Class Families.

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7. Illinois

The state of Illinois.The state of Illinois.

Overall Rating for Middle-Class Families: Least tax-friendly

State Sales Tax: 6.25% state levy. Localities can add as much as 4.75%, and the average combined rate is 8.82%, according to the Tax Foundation. Food and prescription drugs are taxed at only 1% by the state. Clothing and motor vehicles are fully taxed.

Income Tax Range: There is a flat rate of 4.95% of federal adjusted gross income after modifications.

Property Taxes: For homeowners in Illinois, the median property tax rate is $2,165 per $100,000 of assessed home value — the second highest in our round-up.

For details on other state taxes, see the Illinois State Tax Guide for Middle-Class Families.

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6. Oklahoma

The state of Oklahoma.The state of Oklahoma.

Overall Rating for Middle-Class Families: Not tax-friendly

State Sales Tax: 4.5% state levy. Localities can add as much as 7%, and the average combined rate is 8.95%, according to the Tax Foundation. Prescription drugs are exempt and motor vehicles are taxed at a rate of 1.25% (a 3.25% excise tax also applies). Grocery items and clothing are taxable at 4.5%, plus local taxes. 

Income Tax Range: Low: 0.5% (on up to $1,000 of taxable income for single filers and up to $2,000 for married joint filers); High: 5% (on taxable income over $7,200 for single filers and over $12,200 for married joint filers).

Property Taxes: For Oklahomans who own a home, the median property tax rate is $869 per $100,000 of assessed home value. 

For details on other state taxes, see the Oklahoma State Tax Guide for Middle-Class Families.

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5. Alabama

Photo of AlabamaPhoto of Alabama

Overall Rating for Middle-Class Families: Tax-friendly

State Sales Tax: 4% state levy. Localities can add as much as 7.5% to that, and the average combined rate is 9.22%, according to the Tax Foundation. Prescription drugs are exempt. Groceries and clothing are fully taxable, while motor vehicles are taxed at a reduced rate of 2% (additional local taxes may apply).

Income Tax Range: Low: 2% (on up to $1,000 of taxable income for married joint filers and up to $500 for all others); High: 5% (on more than $6,000 of taxable income for married joint filers and more than $3,000 for all others). 

Some Alabama municipalities also impose occupational taxes on salaries and wages.

Property Taxes: In Alabama, the median property tax rate is $395 per $100,000 of assessed home value — the lowest on our list.

For details on other state taxes, see the Alabama State Tax Guide for Middle-Class Families.

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4. Washington

The state of Washington.The state of Washington.

Overall Rating for Middle-Class Families: Most tax-friendly

State Sales Tax: 6.5% state levy. Municipalities can add up to 4% to that, with the average combined rate at 9.23%, according to the Tax Foundation. Grocery items and prescription drugs are exempt. Clothing is taxable, as are motor vehicles. However, there’s an additional 0.3% tax on sales of motor vehicles.

Income Tax Range: Washington has no state income tax.

Property Taxes: Home buyers in the Evergreen State can expect to pay a median property tax rate of $929 per $100,000 of assessed home value. 

For details on other state taxes, see the Washington State Tax Guide for Middle-Class Families.

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3. Arkansas

The state of Arkansas.The state of Arkansas.

Overall Rating for Middle-Class Families: Mixed tax picture

State Sales Tax: 6.5% state levy. Localities can add as much as 5.125%, and the average combined rate is 9.51%, according to the Tax Foundation. Prescription drugs are exempt. Grocery items are taxed at 0.125% (additional local taxes may apply). Motor vehicles are taxed if the purchase price is $4,000 or more (7% tax rate in Texarkana). However, starting in 2022, the rate on sales of used motor vehicles priced between $4,000 and $10,000 will only be 3.5%. Clothing is taxed at the standard rate.

Income Tax Range: Low: 2% (on taxable income from $4,500 to $8,899 for taxpayers with net income less than $22,200), 0.75% (on first $4,499 of taxable income for taxpayers with net income from $22,200 to $79,300), or 2% (on on first $4,000 of taxable income for taxpayers with net income over $79,300); High: 3.4% (on taxable income from $13,400 to $22,199 for taxpayers with net income less than $22,200), 5.9% (on taxable income from $37,200 to $79,300 for taxpayers with net income from $22,200 to $79,300), or 6.6% (on taxable income over $79,300 for taxpayers with net income over $79,300). Beginning in 2021, the top rate for taxpayers with net income over $79,300 will be 5.9% (on taxable income over $8,000).

A “bracket adjustment” of between $40 and $440 is subtracted from the amount of tax due for taxpayers with net income from $79,301 to $84,600.

Property Taxes: For homeowners in the Natural State, the median property tax rate is $612 per $100,000 of assessed home value. 

For details on other state taxes, see the Arkansas State Tax Guide for Middle-Class Families.

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2. Louisiana

The state of Louisiana.The state of Louisiana.

Overall Rating for Middle-Class Families: Tax-friendly

State Sales Tax: 4.45% state levy. Localities can add as much as 7%, and the average combined rate is 9.52%, according to the Tax Foundation. Groceries and prescription drugs are exempt from the state’s sales tax, but localities may tax these. Clothing and motor vehicles are taxable.

Income Tax Range: Low: 2% (on $12,500 or less of taxable income for individuals, $25,000 for joint filers); High: 6% (on more than $50,000 of taxable income, $100,000 for joint filers). 

Property Taxes: The median property tax rate in Louisiana is $534 per $100,000 of assessed home value. 

For details on other state taxes, see the Louisiana State Tax Guide for Middle-Class Families.

 

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1. Tennessee

The states of TennesseeThe states of Tennessee

Overall Rating for Middle-Class Families: Most tax-friendly

State Sales Tax: 7% state levy. There’s also an additional state tax of 2.75% on sales of single items that applies to the portion of the sales price from $1,600 to $3,200. Localities can add up to 2.75%, with an average combined rate of 9.55%, according to the Tax Foundation. Groceries are taxed at 4% by the state, in addition to any additional local taxes. Clothing is taxed at the standard rate. Motor vehicles are taxed at the basic 7% rate, plus the additional 2.75% on purchases between $1,600 and $3,200. There’s no tax on prescription drugs. 

Income Tax Range: There’s no state income tax in Tennessee. However, dividends and some interest are subject to the Hall Tax at a 1% rate in 2020. The first $1,250 in taxable income for individuals ($2,500 for joint filers) is exempt. 2020 is the last year for this tax, which is being phased out. Also, the tax is waived if you’re over the age of 100.

Property Taxes: In Tennessee, the median property tax rate is $636 per $100,000 of assessed home value. 

For details on other state taxes, see the Tennessee State Tax Guide for Middle-Class Families.

Source: kiplinger.com

10 States with the Highest Gas Taxes

Road trips are fun until you have to stop and get gas. Fortunately for drivers, the federal government’s gas tax hasn’t budged from 18.4 cents per gallon since 1993. However, states and the District of Columbia levy their own gas taxes. 

And thanks to the pandemic, folks have been using their cars a lot more since public transportation and flying are viewed as hot-spots for COVID-19. But if you’re traveling cross-country, filling up in certain states can cost you more than others. Here are the 10 states with the highest gas taxes, including a look at how the states do on other big tax metrics, such as sales tax. (A reminder, though: U.S. gas taxes are still among the world’s lowest.)

Gas and diesel prices are from the American Petroleum Institute. Sales taxes are from the Tax Foundation and, when listed as “average,” represent a population-weighted value meant to capture local option taxes. Tobacco and vapor taxes are from the Campaign for Tobacco-Free Kids as well as individual state tax websites.

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Indiana

picture of man at gas pumppicture of man at gas pump

State Fuel Tax: 42.16¢  per gallon of gasoline, 52¢ per gallon of diesel

State Sales Tax: 7% state levy. No local taxes.

Tobacco Taxes:

  • Cigarettes: $1 per pack
  • Snuff: $0.40 per ounce
  • Other tobacco products: 24% of wholesale price
  • Vapor products: Starting July 1, 2022, 15% of gross retail income

For details on other state taxes, see the  Indiana State Tax Guide for Middle-Class Families.

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Florida

picture of man at gas pumppicture of man at gas pump

State Fuel Tax: 42.46¢ per gallon of gasoline, 35.27¢ per gallon of diesel (both gasoline and diesel taxes will increase by 0.3¢ per gallon in 2021)

Average Sales Tax: 6% state levy. Localities can add as much as 2.5%, and the average combined rate is 7.08%, according to the Tax Foundation.

Tobacco Taxes:

  • Cigarettes: $1.34 a pack
  • Cigars: no tax
  • All other tobacco products: 85% of the wholesale price

For details on other state taxes, see the Florida State Tax Guide for Middle-Class Families.

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New York

picture of cars at gas pumppicture of cars at gas pump

State Fuel Tax: 42.7¢ per gallon of gasoline, 43.43¢ per gallon of diesel

Average Sales Tax: 4% state levy. Localities can add as much as 4.875%, and the average combined rate is 8.52%, according to the Tax Foundation. In the New York City metro area, there is an additional 0.375% sales tax to support transit.

Tobacco Taxes:

  • Cigarettes and little cigars: $4.35 per pack (in New York City, an extra $1.50 per pack)
  • Snuff: $2 per container one ounce or less, $2 per ounce for larger containers
  • Cigars and other tobacco products: 75% of the wholesale price
  • Vapor products: 20% of retail price

For details on other state taxes, see the  New York State Tax Guide for Middle-Class Families.

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Hawaii

picture of gas stationpicture of gas station

State Fuel Tax: 46.84¢ per gallon of gasoline, 49.55¢ per gallon of diesel

Average Sales Tax: 4% state levy. Localities can add as much as 0.5%, but the average combined rate is only 4.44%, according to the Tax Foundation.

Tobacco Taxes:

  • Cigarettes and little cigars: $3.20 per pack
  • Large cigars: 50% of the wholesale price
  • Other tobacco products: 70% of the wholesale price

For details on other state taxes, see the  Hawaii State Tax Guide for Middle-Class Families.

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Washington

picture of gas stationpicture of gas station

State Fuel Tax: 49.4¢ per gallon of gasoline, 49.4¢ per gallon of diesel

Average Sales Tax: 6.5% state levy. Municipalities can add up to 4% to that, with the average combined rate at 9.23%, according to the Tax Foundation.

Tobacco Taxes:

  • Cigarettes and little cigars: $3.03 per pack
  • Cigars: 95% of sale price, with a cap of $0.75 per cigar
  • Moist snuff: $2.53 per 1.2-ounce container
  • Other tobacco products: 95% of sale price
  • Vapor products: Closed products, $0.27 per ml. Open containers greater than 5 ml, $0.09 per ml

For details on other state taxes, see the  Washington State Tax Guide for Middle-Class Families.

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Nevada

Las Vegas sign at night with via of stripLas Vegas sign at night with via of strip

State Fuel Tax: 50.48¢ per gallon of gasoline, 28.56¢ per gallon of diesel

State Sales Tax: 6.85% state levy. Localities can add as much as 1.53%, and the average combined rate is 8.23%, according to the Tax Foundation.

Tobacco Taxes:

  • Cigarettes: $1.80 per pack
  • Other tobacco products: 30% of wholesale price
  • Vapor products: 30% of wholesale price

For details on other state taxes, see the Nevada State Tax Guide for Middle-Class Families.

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New Jersey

picture of gas stationpicture of gas station

State Fuel Tax: 50.7¢ per gallon of gasoline, 57.7¢ per gallon of diesel

State Sales Tax: 6.625% state levy. That rate is cut in half (3.3125%) for in-person sales in designated Urban Enterprise Zones located in disadvantaged areas. Salem County, which borders no-tax Delaware, also charges the reduced 3.3125% rate.

Tobacco Taxes:

  • Cigarettes: $2.70 per pack
  • Moist snuff: $0.75 per ounce
  • Other tobacco products: 30% of the wholesale price
  • Vapor products: $0.10 per ml for closed containers. Bulk nicotine liquid is taxed at 10% of retail price.

For details on other state taxes, see the  New Jersey State Tax Guide for Middle-Class Families.

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Illinois

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State Fuel Tax: 52.16¢ per gallon of gasoline, 59.98¢ per gallon of diesel

Average Sales Tax: 6.25% state levy. Localities can add as much as 4.75%, and the average combined rate is 8.82%, according to the Tax Foundation.

Tobacco Taxes:

  • Cigarettes and little cigars: $2.98 per pack, Cook County has an additional tax of $3. Three localities, all in Cook County, add to that. According to the Campaign for Tobacco Free Kids, a pack purchased in Chicago has the highest total tax in the country: $7.16.
  • Snuff: $0.30 per ounce
  • Other tobacco products: 36% of the wholesale price
  • Vapor products: 15% of wholesale price; localities have additional taxes

For details on other state taxes, see the  Illinois State Tax Guide for Middle-Class Families.

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Pennsylvania

picture of gas stationpicture of gas station

State Fuel Tax: 58.7¢ per gallon of gasoline, 75.2¢ per gallon of diesel

Average Sales Tax: 6% state levy. Philadelphia has a local sales tax of an additional 2%, and Allegheny County (Pittsburgh’s home county) adds a local sales tax of 1%, and the combined rate is 6.34%, according to the Tax Foundation.

Tobacco Taxes:

  • Cigarettes and little cigars: $2.60 per pack. The City of Philadelphia levies an additional $2 local tax per pack of cigarettes
  • Other tobacco products: 55 cents per ounce. Additional taxes due in Philadelphia.
  • Vapor products: 40% of wholesale price

For details on other state taxes, see the  Pennsylvania State Tax Guide for Middle-Class Families.

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California

picture of car at gas stationpicture of car at gas station

State Fuel Tax: 63.05¢ per gallon of gasoline (63.65¢ effective July 1, 2021), 83.06¢ per gallon of diesel (83.46¢ effective July 1, 2021)

Average Sales Tax: 7.25% state levy. Localities can add as much as 2.5%, and the average combined rate is 8.68%, according to the Tax Foundation.

Tobacco Taxes:

  • Cigarettes: $2.87 per pack
  • All other tobacco products: 56.93% of manufacturer’s price
  • Vapor products: $0.05 per ml of consumable product

For details on other state taxes, see the  California State Tax Guide for Middle-Class Families.

Source: kiplinger.com

3 Reasons Not to Fear the Biden Tax Hikes

President Biden’s American Families Plan offers a long list of “social infrastructure” programs that will benefit a lot of people. Just as a sampling, the plan would provide free preschool and community college, more Pell Grants, scholarships for future teachers, caps on childcare expenses, training and pay for childcare workers, guaranteed family and medical leave, enhanced unemployment benefits, and tax breaks for lower- and middle-income families. But the president’s plan will also cost a lot of money. And to pay for the $1.8 trillion package, Biden wants to raise taxes on upper-income Americans.

As one would expect, the president’s tax and spending plan is setting off alarm bells for some people. In addition to anxiety over their own personal finances, many Americans are worried about the impact on the U.S. economy as a whole. Run-away inflation, followed by higher interest rates and slow growth are the chief concerns. This makes a lot of people nervous.

But if you’re looking for ways to bring your anxiety level down, here are three reasons why you shouldn’t fear Biden’s proposed tax increases. Plus, it will take some time for the president’s plan to work its way through Congress, and it may be best to just kick back and relax while we wait. After all, you probably don’t need the extra stress in their life right now anyway!

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You’re Not Rich

picture of a man holding open his empty walletpicture of a man holding open his empty wallet

When it comes to tax increases, the American Families Plan can be described as a “soak the rich” plan. So, for most Americans, the proposed tax hikes won’t apply to you. That should bring your stress level down.

While some people who aren’t particularly wealthy potentially could get caught up in some of the proposed tax increases, that would certainly be the exception rather than the rule. The revenue raisers are clearly aimed at the country’s highest earners, and that’s who would end up with a bigger tax bill in the vast majority of cases.

So, for example, the proposal to increase the top income tax rate from 37% to 39.6% reportedly would only apply to single filers with taxable income over $452,700 and married couples with taxable income over $509,300. If the highest capital gains tax rate goes from 20% to 39.6%, it would only impact people earning $1 million or more. The plan to eliminate the step up in basis for inherited property would only apply to gains of at least $1 million. (For more details and more examples, see 7 Ways Biden Plans to Tax the Rich.)

Congratulations if your income and financial situation puts you in the crosshairs for these tax increases – you’ve done very well for yourself. But if you’re not quite up to that level financially, then at least there’s a silver lining – you don’t have to worry about Biden raising your taxes.

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Any Tax Increases Will Be Down the Road

picture of a road with 2022, 2023, and 2024 written on it and an arrow pointing aheadpicture of a road with 2022, 2023, and 2024 written on it and an arrow pointing ahead

Even if you’re wealthy enough to be affected by the proposed tax increases, we don’t expect them to take effect until 2022 at the earliest. While President Biden hasn’t said when he wants the proposed tax increases to take effect, there’s no indication that they would be applied retroactively to the 2021 tax year. Plus, as we mentioned earlier, it will be a while before anything is passed by Congress…and the later in the year it gets, the less likely it will cover 2021.

If the economy doesn’t fully recover soon, any new tax increases could be pushed even further down the road. That’s because raising taxes in a stalled economy is risky. Tax hikes could then be delayed to 2023 or perhaps even 2024.

Delayed tax increases aren’t quite as scary as immediate ones. . Of course, more of your income will be taxed under the old rules if new tax increases are postponed. But you may also be able to mitigate the damage in future years if you have more time to plan for bigger tax bills.

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Biden Might Not Get What He Wants

picture of the Capitol dome painted on a board that is split in halfpicture of the Capitol dome painted on a board that is split in half

Won’t you feel silly if you worried about tax increases for months and then nothing happens. It’s tough raising taxes on anyone – much harder than boosting taxes on corporations. And there’s certainly a chance that President Biden won’t get the tax hikes he’s proposing. Or they could be cut down from where they stand right now (e.g., instead of a capital gains rate increase to 39.6%, maybe Congress decides that 28% is the highest they can go). Congress could also come up with a whole new slate of tax increases that don’t affect you, or they could shelve the entire plan. At this point, there are so many different directions this could go.

But Congress is controlled by Democrats. They won’t defy the president, who’s leader of their party – right? Well, some of them might. Republicans aren’t going to support tax hikes at all. That means Democrats will have to go it alone – probably using the “budget reconciliation” process used to pass the American Rescue Plan back in March. That means they’ll need all 50 Democratic Senators to pass tax legislation. If just one Democratic Senator balks (we’re looking at you, Sen. Manchin), then the whole plan could collapse. Or a Democratic Senator could demand changes to the plan that could gut one or more of Biden’s tax increase proposals.

Tax hikes aren’t a lock. And if they’re not a lock, there’s no sense getting all worked up over them now. Instead, calmly start evaluating your current situation and thinking ahead so you’re prepared for tax increases if they happen. But don’t start reaching for the panic button quite yet.

Source: kiplinger.com

Biden Wants to Extend the $3,600 Child Tax Credit Through 2025

Families are getting a bigger and better child tax credit for 2021. And, if President Biden gets his way, most of the credit enhancements will continue to be available for several more years while full refundability of the credit will be permanent.

Thanks to the American Rescue Plan, which was enacted in March, this year’s child tax credit for many families is increased from $2,000 per child to $3,000 per kid ($3,600 for children under age 6), 17-year-olds qualify for the credit, and the credit is fully refundable. The IRS is required to make advance payments of the child credit to qualifying families in 2021, too. Eligibility for the credit and advance payments, and calculation of the amount of the advance payment, will be based on your 2020 tax return (if a 2020 return hasn’t been filed, the IRS will look to your 2019 return). The advance payments will account for half of a family’s 2021 child tax credit. The IRS says it will start sending out monthly payments in July. Families who qualify for the full $3,000 or $3,600 credit could see monthly checks of $250 or $300 per child from July through December. Families with higher incomes who qualify for the $2,000 credit will get monthly payments of $167 per child for the same six months. (To see how much you’ll get, use Kiplinger’s 2021 Child Tax Credit Calculator.)

The IRS is also developing an online portal so you can update your income, marital status, and the number of qualifying children. If your circumstances change in 2021 from your last filed federal tax return, and you believe those changes could affect the amount of your child credit for 2021, you will be able to go to the portal once it’s up and running and update it with the correct information. Also, people who want to opt out of the advance payments, and instead take the full child credit on their 2021 return, will be able to do so through the same online portal. The IRS expects to launch the portal by July 1.

Extending the Child Tax Credit Enhancements

Although the child tax credit expansions currently apply for this year only, Democrats want to extend the bigger break and eventually make it permanent. They tout the impact that a higher and fully refundable child tax credit would have on reducing child poverty in the United States, and have sponsored bills in Congress to make the credit enhancements and advance payments permanent. For example, Richard Neal (D-Mass.), the Democratic Chairman of the House Ways & Means Committee, recently unveiled proposed legislation to permanently extend the 2021 child tax credit expansions as part of a bigger plan to provide more family and medical leave benefits and to make childcare more affordable.

President Biden has now jumped on the child tax credit extension bandwagon, too. His newly released American Families Plan would extend the expanded child tax credit through 2025, though he would make full refundability, and we assume advance payments, permanent. It should come as no surprise that many of the tax changes that were enacted in former President Trump’s 2017 tax reform law are set to expire after 2025, including that law’s provision that doubled the child credit from $1,000 to $2,000.

It’s too soon to tell whether Biden’s American Families Plan proposal can even be enacted. There are lots of hurdles to passage. The big tax increases on upper-income individuals included in the plan make it unpalatable for Republicans, and possibly even for some moderate Democrats. It’s easier to predict that the 2021 child tax credit expansions are unlikely to go away after this year. After all, this is Washington, D.C., and politicians will find themselves hard pressed politically to take a tax benefit away from millions of lower- and middle-class Americans.

For more information on this year’s child tax credit, see Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs.

Source: kiplinger.com

What are “Plus-Up” Payments (And Will You Get One)?

Did you already get a third stimulus check? If so, would you like the IRS to send you even more money? Well, for some people, that’s exactly what’s happening, thanks to a twist in the law that requires the IRS to send a supplemental payment to certain people who already received a third stimulus check. (And we’re not talking about a fourth round of stimulus payments to everyone.) The IRS is calling these extra checks “plus-up” payments, and more than 2 million lucky Americans have already gotten the additional cash. More plus-up payments will be sent in the coming weeks as the IRS continues to process 2020 tax returns. The big question is: Will you get one?

Generally, plus-up payments will go to Americans who received a third stimulus check that was based on information taken from their 2019 federal income tax return or some other source, but who are eligible for a larger payment based on a 2020 return that is filed and/or processed later. This could happen, for example, if you had a new baby last year that is reported as a dependent for the first time on your 2020 return (see below for other possible triggers).

So, if you haven’t already filed your 2020 return, you may have an extra incentive to get it done quickly. Your 2020 return must be filed and processed by the IRS before August 16, 2021 (or September 1 if the May 17 filing deadline is pushed back any further) if you want to get a plus-up payment. That means you still have plenty of time to act – by why wait? The sooner you turn in your return, the sooner you’ll get your “plus-up” payment.

[Stay on top of all the new stimulus bill developments – Sign up for the Kiplinger Today E-Newsletter. It’s FREE!]

How Stimulus Payments Are Calculated

Most eligible Americans have already received their third stimulus check. The “base amount” is $1,400 ($2,800 for married couples filing a joint tax return). Plus, for each dependent in your family, the IRS adds on an extra $1,400. Unlike for previous stimulus payments, the age of the dependent is irrelevant.

However, third-round stimulus checks are then “phased out” (i.e., reduced) for people with an adjusted gross income (AGI) above a certain amount. If you filed your most recent tax return as a single filer, your payment is reduced if your AGI is over $75,000. It’s completely phased-out if your AGI is $80,000 or more. For head-of-household filers, the phase-out begins when AGI reaches $112,500 and payments are reduced to zero when AGI hits $120,000. Married couples filing a joint return will see their third stimulus check drop if their AGI exceeds $150,000 and completely disappear when AGI is $160,000 or more.

The IRS looks at your 2019 or 2020 tax return to determine your filing status, AGI, and information about your dependents. If you don’t file a 2019 or 2020 return, the IRS can sometimes get the information it needs from another source. For instance, it got information from the Social Security Administration, Railroad Retirement Board, or Veterans Administration for people currently receiving benefits from one of those federal agencies (although the IRS may not have gotten all the information it needs to send a full payment). If you supplied the IRS information last year through its online Non-Filers tool or by submitting a special simplified tax return, the tax agency can use that information, too.

If your 2020 tax return isn’t filed and processed by the time it starts processing your third stimulus check, the IRS will base your payment on your 2019 return or whatever other information is available. If your 2020 return is already filed and processed, then your stimulus check will be based on that return. If, however, your 2020 return is not filed and/or processed until after the IRS sends your third stimulus check, but before August 16, 2021, that’s when the IRS will send you a plus-up payment for the difference between what your payment should have been if based on your 2020 return and the payment actually sent that was based on your 2019 return or other data.

(Note: The IRS is experiencing tax return processing delays. So, even if you submit your 2020 return before the IRS sends your stimulus check, your payment still might be based on your 2019 return because your 2020 return isn’t processed in time. Returns filed electronically are generally processed faster than paper returns.)

If for some reason you don’t get a plus-up payment, you’ll still get your money if a payment based on your 2020 tax return is higher than the payment you actually received – but you’ll have to wait until next year to get it. In that case, you can claim the difference as a Recovery Rebate credit on your 2021 tax return, which you won’t file until 2022.

[Use our Third Stimulus Check Calculator to compare your payment if it’s based on your 2019 return vs. your 2020 return. Just answer three easy questions to get a customized estimate.]

Who Will Get a Supplemental “Plus-Up” Payment

Again, you’ll only get a supplemental “plus-up” payment if you received a third stimulus check based on your 2019 tax return or other information, but you would have gotten a larger check if the IRS based it on your 2020 return. So, who falls into this category? Of course, it depends on your specific circumstance. However, to give you a general idea, here are a few examples of hypothetical taxpayers who should get a plus-up payment.

You Had Less Income in 2020 Than in 2019: Kay was unemployed for much of 2020. As a result, her AGI dropped from $78,000 in 2019 to $40,000 in 2020. Kay received a $560 third stimulus check that was based on her 2019 return (she is single with no dependents). Since her 2019 AGI was above the phase-out threshold for single filers ($75,000), her payment was reduced. Kay later files her 2020 tax return, which is processed before August 16, 2021. Since Kay’s 2020 AGI is well below the applicable phase-out threshold, her third stimulus check would have been for $1,400 if it were based on her 2020 return. As a result, Kay will receive a $840 plus-up payment ($1,400 – $560 = $840).

You Had a Baby in 2020: Josh and Samantha had their first child in 2020. They’ve been married for five years, and they file a joint return each year. Their AGI was $110,000 in 2019 and $120,000 in 2020, which are both below the phase-out threshold for joint filers ($150,000). The IRS sent Josh and Samantha a $2,800 third stimulus check based on their 2019 return. They filed their 2020 tax return before the IRS sent the payment, but the return was not processed until a week after the payment was sent. That’s why the payment was based on their 2019 return. Since Josh and Samantha claimed their new bundle of joy as a dependent on their 2020 return, their stimulus check would have been for $4,200 if it were based on their 2020 return (i.e., they would have received an additional $1,400 for their baby). As a result, the IRS will send Josh and Samantha a $1,400 plus-up payment ($4,200 – $2,800 = $1,400).

You Got Married in 2020: Patty and Greg were married in 2020. They had a combined AGI of $150,000 in 2020 and have no dependents. In 2019, as separate single filers, Patty had an AGI of $72,000 and Greg had an AGI of $78,000. The IRS sent Patty a $1,400 third stimulus check based on her 2019 return. Since her 2019 AGI was below the phase-out threshold for single filers ($75,000), her payment was not reduced. The IRS sent Greg a $560 third stimulus check based on his 2019 return. Since his 2019 AGI was above the phase-out threshold for single filers, his payment was reduced. Between the two of them, they got a total of $1,960 in third stimulus check payments ($1,400 + $560 = $1,960). After receiving their stimulus checks, Patty and Greg file a joint return for the 2020 tax year that is processed before August 16, 2021. Since the AGI reported on their 2020 joint return does not exceed the phase-out threshold for joint filers ($150,000), their stimulus check would have been for $2,800 if it were based on their 2020 return (i.e., it wouldn’t have been reduced). As a result, the IRS will send Patty and Greg a $840 plus-up payment ($2,800 – $1,960 = $840).

You Used the Non-Filers Tool Last Year: Mary is single and has two dependent children. One turned 15 and the other turned 18 in 2020. Mary was not required to file a 2019 tax return, but she did use the IRS’s Non-Filers tool last year to get a first-round stimulus check. Since children over 16 did not qualify for the extra $500 payment for first-round payments, Mary only reported her youngest child to through the tool. The IRS sent Mary a $2,800 third stimulus check based on the information it received through the Non-Filers tool. Mary later files a 2020 tax return, which is processed before August 16, 2021. She used the head-of-household filing status, reported an AGI of $15,000, and claimed both of her children as dependents. For third-round stimulus checks, an additional $1,400 is added to the total payment for each dependent regardless of the dependent’s age. Since Mary’s 2020 AGI is below the phase-out threshold for head-of-household filers ($112,500), her third stimulus check would have been for $4,200 if it were based on her 2020 return. As a result, Mary will receive a $1,400 plus-up payment ($4,200 – $2,800 = $1,400).

A Federal Agency Supplied Information to the IRS: Ron is a disabled veteran who receives benefits from the Department of Veterans Affairs (VA). He is single and has one dependent child. Ron was not required to file a 2019 tax return, but the VA sent information to the IRS about Ron. The VA did not send any information about Ron’s child. Based on the information it had, the IRS sent Ron a $1,400 third stimulus check. After receiving this payment, Ron files a 2020 tax return, which is processed before August 16, 2021. Ron filed as a single person with an AGI of $18,000 and one dependent. Since Ron’s 2020 AGI does not exceed the phase-out threshold for single filers ($75,000), his third stimulus check would have been for $2,800 if it were based on his 2020 return. As a result, the IRS will send Ron a $1,400 plus-up payment ($2,800 – $1,400 = $1,400).

Source: kiplinger.com

Who’s Not Eligible For a Third Stimulus Check

Millions of Americans have already received a third stimulus check (either by direct deposit or paper check). But if nothing has shown up in your bank account or mailbox yet, it might be because you’re not eligible for a third payment. Some people may have gotten the impression that everyone is entitled to a third stimulus check. Unfortunately, that’s just not the case.

There are a few reasons why you could be left without a third stimulus check. It could be because of your income, age, immigration status, or some other disqualifying factor. Here’s a list of people who won’t be getting a third stimulus check from Uncle Sam. Hopefully, you’re not on the list and you’ll get a nice payment soon — especially if you’re one of the millions of Americans struggling financially because of the COVID-19 pandemic.

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High-Earners

picture of rich man smoking a cigar and drinking brandypicture of rich man smoking a cigar and drinking brandy

Third-round stimulus checks start at $1,400 per eligible person ($2,800 for married couples who file a joint tax return). If you have any dependent, there’ll be an extra $1,400 tacked on for each one of them. So, for example, a married couple with two dependent children can get up to $5,600. (Use our Third Stimulus Check Calculator to figure out how much you will get.)

However, third stimulus checks are quickly phased-out for people at certain income levels (based on your 2019 or 2020 tax return). If your income is high enough, your check will be completely phased out and you’ll get nothing! For single people, that happens if your adjusted gross income (AGI) is above $80,000. If you’re married and file a joint tax return, you’ll get nothing if your AGI exceeds $160,000. If you claim the head-of-household filing status on your tax return, your payment will be reduced to zero if your AGI tops $120,000.

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Dependents

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If you’re claimed as a dependent on someone else’s tax return, you won’t receive a stimulus check. That means no payments to children living at home who are 17 or 18 years old, or to college students who are 23 or younger at the end of the year who don’t pay at least half of their own expenses.

Other dependents won’t receive stimulus payments, either. For example, an elderly parent living with an adult child is out of luck and won’t get a check.

However, if you’re a dependent, at least the person claiming you as a dependent on their tax return will get an extra $1,400 added to their third stimulus check. Maybe, if you’re nice, they’ll give you some of that money.

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Nonresident Aliens

picture of line dividers at immigration officepicture of line dividers at immigration office

A person who is a nonresident alien is not eligible for a third stimulus check. Generally, a “nonresident alien” is not a U.S. citizen, doesn’t have a green card, and is not physically present in the U.S. for the required amount of time.

See IRS Publication 519 for more information on the taxes for nonresident aliens.

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People Without a Social Security Number

picture of hand holding a Social Security cardpicture of hand holding a Social Security card

Generally, you must have a Social Security number to get a stimulus check. To get the extra $1,400 for a dependent, the dependent must also have a Social Security number. If they don’t, then you probably won’t get the addition amount.

There are, however, a few exceptions to this rule. First, an adopted child can have an adoption taxpayer identification number (ATIN) instead of a Social Security number. Second, for married members of the U.S. armed forces, only one spouse needs to have a Social Security number. And, third, if your spouse doesn’t have a Social Security number, you can still receive a third stimulus check, including any extra money for dependents, if you have a Social Security number.

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Deceased People

picture of elderly woman looking a old photos of her and her late husbandpicture of elderly woman looking a old photos of her and her late husband

It may seem obvious that a deceased person isn’t eligible for a third stimulus payment. However, only people who died before 2021 are ineligible. Essentially, they’re treated as if they don’t have a Social Security number. However, if a person who died before 2021 was a member of the U.S. military, his or her surviving spouse can still receive a third stimulus check even if the spouse doesn’t have a Social Security number. In addition, the extra $1,400 for each dependent is not available if the parent died before 2021 or, in the case of a joint return, both parents died before then.

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People Who the IRS Doesn’t Know About

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The IRS will automatically send a third stimulus payment to people who filed a 2019 or 2020 federal income tax return. People who receive Social Security, Supplemental Security Income, Railroad Retirement benefits, or veterans benefits will receive a third payment automatically, too. However, if the IRS can’t get the information it needs from your tax records, or from the Social Security Administration, Railroad Retirement Board, or Veterans Administration, then it can’t send you a check.

However, if you don’t get a third stimulus check now, you won’t lose out on the money if you’re eligible for a payment — but you’ll have to wait until next year to get it. You’ll be able to claim the proper amount as a Recovery Rebate tax credit when you file your 2021 tax return, which is due by April 18, 2022 (April 19 for residents of Maine and Massachusetts).

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Stay on Top of Stimulus Check Developments

The words stimulus plan on paper atop U.S. currencyThe words stimulus plan on paper atop U.S. currency

Follow Kiplinger for the latest news and insights on federal stimulus payments (and other important personal-finance matters). Stay with us on:

See some of our other coverage of the third stimulus check:

Source: kiplinger.com