$1,200 can go a long way when it needs to.
Patrick Holland/CNETUS President Donald Trump signed an unprecedented $2.2 trillion relief bill on March 27 that takes aim at the financial impact of the coronavirus. It includes a $1,200 stimulus check, also called an Economic Impact Payment, for most adults and $500 per dependent child. Individuals with an adjusted gross income of less than $75,000 or married couples with less than $150,000 will receive the full amount, while those earning more will see a reduced check based on their income. The IRS says it'll use taxpayers' 2019 tax returns, or 2018 returns, depending on which ones have been filed, to determine the amount.
The Treasury Department told CBS News on April 3 that the date for disbursement for 50 million to 70 million Americans is April 15. US Treasury Secretary Steven Mnuchin said during a press briefing Monday that 80 million checks will be sent out electronically. The funds will be sent via direct deposit using the banking information from a filer's latest tax return. On April 11, some Twitter users posted pictures of stimulus payments in their bank accounts.
Those on Social Security, disability, survivor benefits or who receive Railroad Retirement benefits will also receive funding automatically.
The web portal for nonfilers on the IRS' website launched on April 11. According to the page, US citizens and resident aliens are eligible for the stimulus funds if they:
- Have a valid Social Security number,
- Couldn't be claimed as a dependent of another taxpayer, and
- Had adjusted gross income under certain limits.
Read more: Find out if you're eligible to receive a coronavirus stimulus check
For many, such as the 10 million who filed for unemployment benefits in the last two weeks of March, this money will offer needed support during the pandemic. For others, the funds will be more supplemental, at least for now.
If you're in the latter category, here are six ways to make the best use of your stimulus check.
Watch this: Coronavirus stimulus checks: Everything you need to know
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1. Take care of your immediate needs
Above all else, make sure your immediate needs are met. This includes food, monthly bills and rent or mortgage. But before you prioritize rent over, say, food, consider that many jurisdictions, utility companies and even banks are offering relief due to the outbreak. See which programs you can take advantage of, then allocate funds accordingly.
2. Pay your taxes
Treasury Secretary Mnuchin announced on March 20 that the deadline for filing and paying income taxes has been pushed back to July 15. Those who haven't filed -- and will owe the government money -- could use the stimulus check to cover the tax payment. If you haven't already saved for federal and state income taxes and are facing financial hardship, consider giving the money right back to the government.
3. Reduce your debt
One way to secure your financial future is to reduce your debt. A significant payment made to pay down a credit card and loan will help reduce the amount of interest paid on an account carrying a balance. The less interest you have to pay, the more funds you'll have available in the future. But before you do that, check with the debt holders, because some are offering relief, including deferred payments and waived interest. Just be sure to read the fine print, as some of the assistance offered could delay interest rather than forgive it.
4. Start or add to an existing emergency fund
It can't be stressed enough how important it is to have an emergency fund. As this outbreak shows, the world can change very quickly. The fund should be equal to the amount of money spent on expenses for three to six months. While the $1,200 likely won't cover that entire amount, it can be used as a starting point. A simple savings account can be used to keep the money safe.
5. Give to those in need
Those fortunate enough to find themselves not needing any of the $1,200 for themselves should consider giving it to people who do. There are many charities fighting the pandemic, such as food banks and hospitals. Another consideration is to help out friends and family members who've been hit hard by the pandemic.
6. Open a long-term investment account for your children
Part of the stimulus package provides an additional $500 per child. If your family is already comfortable, there's a way to make use of that money to help your kids' future.
"Provided you don't need this money, consider opening a 529 plan for your child," said certified financial planner Marguerita Cheng. "Your state may offer a tax benefit. This money can grow tax-free. If appropriate, you can even contribute modest amounts of, say, $50 to $100 regularly."
To start a 529 plan, contact your bank or investment firm to see what they have available and what benefits will come your way if you open one up.
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