The most essential thing to know about stimulus checks: The IRS equation - CNET

The stimulus check formula determining how much money you get has changed for a third payment.

Sarah Tew/CNET

Many things are factored in when it comes to your eligibility for receiving a third stimulus check of up to $1,400 per adult and dependent. For example, the income limits for the stimulus formula help determine who qualifies for the full payment amount, who gets a smaller portion and who gets no check at all. The main deciding factor, however, is the stimulus formula the IRS will use once the $1.9 trillion stimulus relief bill is finalized.

We created a stimulus calculator that uses this specific formula, which is based on your annual income and the number of dependents you have, regardless of their age. For the newest proposed stimulus check, the formula has undergone several changes, when compared with the first two stimulus payments, that could determine if you'll get a third check or not.

We'll explain how the IRS uses its stimulus formula to determine your total check amount and how it can be the difference between your family getting $5,600 or nothing at all. Additionally, here are the top things to know about stimulus payments today, including when you could expect a third check and what could happen with a third check approved during tax season. This story is updated regularly.

Stimulus check formula: Important points to remember

Before we dig into changes for a potential third stimulus check, in general, your tax return is one of the most important factors in determining your stimulus check total. The other factors include your adjusted gross income, or AGI, and the stimulus check formula. You can still qualify for a stimulus check if you're a nonfiler who doesn't pay taxes too.

The major variables the IRS plugs into the stimulus formula are:

• Your AGI per your 2019 or 2020 federal tax returns.
• Upper income limits for single taxpayers, heads of household (for example, a single person with at least one child) and married couples filing jointly.
• The number of eligible dependents you claim.
• Reduction or "phase-out" rate -- the amount your total would drop for every $1,000 you make above the income limit that allows you to qualify for the full check amount. In other words, the IRS calculates a partial payment if you don't qualify for the full amount.

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How the third stimulus check targets income way more this time

The recent proposal to "target" the $1,400 stimulus check will keep the highest earners from receiving a partial payment. If the proposal is adopted, the qualifications would be:

• Full $1,400 amount if you earn less than $75,000 (single taxpayer); $112,500 (head of household); $150,000 (married).
• Disqualified at $80,000 (single); $120,000 (head of household); $160,000 (married).
• Phase-out rate increased to preserve this upper limit.
• These high earners wouldn't receive partial checks even if they have dependents.

Dependents could add to the total amount of your third stimulus check

With the previous two stimulus checks approved in March 2020 as part of the CARES Act and then in December, it was possible to get a partial payment even if you exceeded the maximum income limit -- if you had dependents. For example, say a married couple with an AGI of $200,000 claimed two dependents. Using the previous formula, that family would still get a partial check.

That's because the previous formula begins with the largest amount you'd be eligible to receive (for example, $1,400 per single taxpayer or $2,800 for joint filers) and adds $1,400 for each qualifying dependent. Then it reduces the total possible sum according to your AGI and the phase-out rate.

It's a little like starting a test with a perfect 100 point score and subtracting a point for every question you miss, rather than starting with zero points and adding them all up at the end of the test.

Multiple factors can affect your stimulus check payment.

Angela Lang/CNET

But in this case, the dependents you name can start you at a higher value, say 110 points in our classroom example. So by the time you subtract "points," you may still get more than people who don't have dependents -- even if your AGI is above the maximum cap. The more child dependents you have, the higher your starting value and the higher your ending value, too.

However, the third check is designed to target stimulus payments by setting a firm cutoff, which means that it would start by evaluating your AGI and nothing else. If you're over the limit, it wouldn't matter how many dependents you have. You still wouldn't be eligible for a check.

On the other hand, a family with a large number of dependents and an AGI within the boundaries could still receive a large partial payment, as long as they come in below that absolute upper income limit. You can experiment with our stimulus calculator for an idea of what you'd get.

Phase-out or reduction rate: Why the two are essential, how they work

A sliding scale is involved here. For the second check, for example, if your AGI was less than $75,000 as a single taxpayer (that means no kids), you should have received the entire stimulus check total of $600. If you made more than that, the size of your check would diminish until you reached an income level of $87,000, after which point you'd be ineligible.

For the planned $1,400 stimulus check, things have recently changed: You might receive the full $1,400 amount if you earn under $75,000 a year (your AGI as a single taxpayer), with diminishing returns up until an $80,000 cutoff. You'd receive a partial check for an AGI between $75,000 and $79,900. Again, you can see the differences in our $1,400 stimulus check calculators.

For heads of households and married couples with dependents, these other household members are an important part of the equation -- up to a point (see above).

For more information, here are the top things to know about stimulus checks. And see how SSDI and SSI recipients, older adults and retirees and people who aren't US citizens or Americans who don't live in the US could also qualify, including families with mixed-status citizenship.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

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