Whether this is your first recession or one of many you've lived through, there's simply nothing that could have prepared Americans for the disruption caused by the coronavirus disease 2019 (COVID-19) pandemic.
Whereas most recessions progress over time, COVID-19 has exacted an immense physical and financial toll on the U.S. in a very short time frame. In five months, more than 150,000 Americans have died, and more than 20 million have been jettisoned from the workforce as a result of nonessential businesses' shutdowns.
The CARES Act: A needed response to a never-before-seen problem
Though work continues on the medical front to combat COVID-19, lawmakers on Capitol Hill felt the best course of action to fight the financial stresses caused by the pandemic was to throw a record amount of cash at the problem. Thus, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was born on March 27.
The CARES Act clocked in at $2.2 trillion, which is nearly 3 times as much as the Obama administration's relief package to prop up banks and the U.S. economy following the financial crisis. The CARES Act doled out $100 billion to help hospitals fight COVID-19, allocated around $350 billion in loans to small businesses, and set aside close to $500 billion to aid distressed industries. Some $260 billion was also used to expand the unemployment program between April 1 and July 31. By "expand," I mean boost payouts for eligible beneficiaries by $600 a week.
But it's the direct stimulus payments tied to the CARES Act that people will most remember. According to data from the Internal Revenue Service, close to 160 million people received an Economic Impact Payment under the CARES Act.
Unfortunately, the CARES Act didn't do a lot for individuals and households. It proved to be a financial lifeline for businesses, but a Money/Morning Consult poll in April found that close to three-quarters of stimulus recipients had spent or expected to spend their payout in four weeks or less. Considering that the pandemic has been ongoing for five months, these Economic Impact Payments weren't nearly enough for most people.
The good news is, stimulus round two looks to be around the corner.
Here's how to calculate your next stimulus payout
There's little question that Democrats and Republicans have some big differences to mull over between the HEROES Act, which was passed by the Democrat-controlled House on May 15, and the HEALS Act (that's the Health, Economic Assistance, Liability and Schools Act), which the Republican-led Senate introduced this past Monday, July 27. The total cost of these two proposals differs by a whopping $2 trillion.
But if there's one aspect of the HEROES Act and HEALS Act on which lawmakers' views pretty much align, it's on the direct stimulus front. This means you can calculate how much you're likely to receive when the next stimulus proposal is signed into law.
What's beautiful about the HEROES Act and HEALS Act is that they're both using the same payout scale and qualifying income thresholds as the CARES Act, with two minor changes that I'll cover in a moment.
For those who may recall, the CARES Act resulted in maximum payouts of $1,200 for individuals and $2,400 for couples filing jointly. That will once again be the case.
To receive this maximum payout, single, head-of-household, and married tax filers would need an adjusted gross income (AGI) below $75,000, $112,500, and $150,000 on their most recent federal income-tax filing. Comparatively, single, head-of-household, and married filers with AGIs above $99,000, $136,500, and $198,000 won't receive any stimulus money. Lastly, for single, head-of-household, and married filers with AGIs between these upper and lower bounds, $5 in stimulus money is deducted for every $100 in AGI above the lower threshold.
As an example, a single individual with $85,000 in AGI would qualify to receive a stimulus check of $700. Maximum payouts of $1,200 are given up to the $75,000 level, with $5 deducted for every $100 in AGI beyond this point. With a single taxpayer netting $85,000 in AGI, $10,000 over the maximum payout threshold, $500 in stimulus would be deducted, leaving them with $700.
Now, for those two changes...
However, for some families, the stimulus payout calculation doesn't end here. That's because dependents can also factor into the final payout.
Under the CARES Act, dependents aged 16 and under added $500 each to what a parent or household received. Therefore, a married couple bringing home less than $150,000 in AGI with three young children walked away with a payment for $3,900. With the HEROES Act and HEALS Act, two differences from the CARES Act could affect a couple's, parent's, or guardian's payout.
First off, the HEALS Act completely removes the age limits associated with being a dependent. With the CARES Act, senior dependents, seniors in high school who were age 17 or 18, and college dependents weren't able to help their parent or household net the extra $500 payout. That wouldn't be the case any longer, with no age restrictions tied to HEALS Act dependents. According to an analysis by the Tax Foundation, this would mean an additional 26 million people would qualify to help their parent or household.
The second change would come into play if the HEROES Act becomes the standard. With the HEROES Act, dependent pay bumps up to $1,200 from $500, although there's a limit of three dependents per household that would qualify. The HEROES Act also removes the age restrictions tied to being a dependent. It should be noted that the HEALS Act has no limit on qualifying dependents.
As an example, a married couple with an AGI below $150,000 and four dependent children would receive $4,400 under the HEALS Act and $6,000 under the HEROES Act. The four children would all add $500 each, per the HEALS Act, to the $2,400 that the couple would receive. Meanwhile, three children would boost the couple's payout by $1,200 each (since there's a three-dependent limit) under the HEROES Act, thus adding $3,600 to the $2,400 the couple would already be receiving.
There might be some ironing out left to do for the next stimulus bill, but that shouldn't stop you from being able to calculate your next stimulus payout.
The $16,728 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.
The business news you need
With a weekly newsletter looking back at local history.