Stimulus Payments: Round #2 (FAQs)

An economic relief package was signed by President Trump just over a week ago creating a second round of stimulus checks for many American taxpayers.

How much will I be receiving?

The max amount per taxpayer is $600, half of the first round’s stimulus payment.  An additional $600 is also included for any dependents under 17 years of age (up from the $500 for dependents in the previous round).

Who is eligible for a stimulus payment?

Individuals with an adjusted gross income on their 2019 return of less that $75,000 will receive the full $600.  Individuals who file as Head of Household will receive $600 if their income is under $112,500.  Married couples will earn $1,200 ($600 per person) if their AGI was less than $150,000.

For taxpayers who make more than the income limit, the stimulus payment is reduced by $5 for every $100 earned above the limit.  For example, a single filer with an AGI on their 2019 return of $76,000 should expect a stimulus payment of $550 ($1000 / 100 = 10 x 5 = $50).  Married filers with a 2019 AGI of $156,000 should expect a stimulus payment of $900 ($6000 / 100 = 60 x 5 = $300).

An additional $600 will be added for each claimed dependent under the age of 17.

How will I receive my stimulus money?

If your last return was filed with direct deposit information for a refund OR if you provided your direct deposit information through the IRS website for the last round of stimulus checks, you should receive your refund via direct deposit.  If DD information wasn’t provided, you will receive your payment by check.  The IRS is the best resource for questions about the status of your payment or the method by which you will receive it.  View their stimulus resources here.

I didn’t receive the first round of stimulus money because of my income, but I’m eligible based on 2020 income.  Will I receive it now?

If you missed out on either or both stimulus payments because of previous years’ income but are eligible based on 2020 income, you can claim the “recovery rebate credit” on your 2020 return.

I hadn’t yet filed my 2019 return when the first round of stimulus checks went out and was ineligible based on 2018 income.  My 2019 return has since been filed and I am now eligible.  How much will I receive?  

You should expect to receive the appropriate amount of the current round of stimulus money based on your 2019 tax return.  The first round of stimulus checks will not be included in this payment, but the rebate for that amount should be claimed on your 2020 return.

I only received a portion of the total available rebate because my AGI exceeded the limit, but my 2020 income is much lower.  Will I receive any of the missed rebate? 

A decrease in your 2020 income may result in all or some of the missed portion of the rebates becoming available to you in the form of the recovery rebate credit.  For example, a single taxpayer with no dependents and a 2019 AGI of $84,000 should have received $800 of the $1200 rebate available in round #1.  The same taxpayer should receive $200 of the $600 available in round #2.  If the taxpayer’s 2020 income decreases to $60,000, for example, he/she would be eligible for the full $1800 distributed over both rounds of stimulus payments.  Since he/she would have already received $1000 in stimulus, the remaining $800 should be claimed on the 2020 return as a credit.

I added a dependent in 2020.  Can I claim the credit for dependents retroactively? 

The amount of the missed credits (up to $1100 per dependent) can be claimed as part of the recovery rebate credit on your 2020 return.

If I claim the credit on my 2020 return, how do I receive the stimulus money?

If you are eligible for the payment on your 2020 return, the credit will either reduce your balance due OR be added to your refund.

What documentation do I need to provide at tax time for any stimulus money I’ve already received? 

Taxpayers should receive documents titled Notice 1444 (for stimulus round #1) and Notice 1444-B (for stimulus round #2) that will list the amount of stimulus money received.  Confirm that the numbers listed match the amount you actually received each round.  Both of these documents, if applicable, should be provided to your tax preparer.

Take Advantage of the Homestead Exemption and Save!

Have you heard of the Homestead Exemption?  If you’re a homeowner this is an easy way to save money on your annual property taxes.  The process is simple – you must own the home, occupy it as your legal residence, and file appropriate paperwork with the county in which you reside.  Depending on the county, applications may be filed with the Tax Commissioner’s office or the Tax Assessor’s office.    

In order for the exemption to be counted towards the current year’s property tax bill, the application must be filed prior to April 1st.  Applications filed after the 1st will result in a loss of the exemption for that year.  In order to receive the homestead exemption for the current tax year, the homeowner must have owned the property on January 1.   

The state of Georgia offers homestead exemptions to all qualifying home owners.  Some counties have increased the amounts of their homestead exemptions to above the amounts offered by the State.  As a general rule, exemptions offered by the county are more beneficial to the homeowner than those offered by the state.    

How much can you expect to save?  The exemption varies from county to county and additional exemptions are available to homeowners with special circumstances (see below).  The basic homestead exemption saves most homeowners $250 to $600 on average each year.  That number increases to as much as $1200 if the home is in the city of Atlanta.  Additionally, the higher your property value, the greater the potential savings.      

How is the savings calculated?  The amount of your exemption is subtracted from the assessed value of your property as determined by the county tax assessor.  The remaining amount is then multiplied by your property tax rate to arrive at the amount of your annual property taxes.  For example, a homeowner in Cobb County with an assessed value of $100,000 who applies for the basic homestead exemption of $10,000 would only pay property taxes on $90,000.  If that homeowner did not file for the exemption, he/she would pay property taxes based on the full assessed value of $100,000.  

Other exemptions that you may be eligible for include School Tax (applicable when you reach age 62), Senior (applicable at age 65, income limits exist), Disability and Veteran’s Disability, Surviving Spouse and more.  Visit the county websites for guidelines and application information.

Looking for information on the Homestead Exemption in your county?  Visit the links below.

County Exemption Information and Applications:  

*This blog was originally posted in January 2018 and has been updated to include new county links and additional information.  

How the Gift Tax Works

Have you heard of a “Gift Tax”?  Many people have heard the term, but few know what it means, what the tax implications are, and what exclusion limits exist. 

Gift tax is a tax paid, typically by the donor, on non-excluded gifts after a lifetime limit is reached. In some cases, the donee (recipient) may agree to pay the tax instead of the donor.  A separate tax return is required for the donor for the tax year in which the gift was given.  For example, if you give a gift that is not excluded in 2019, you will need to file a Gift Tax Return (Form 709) along with your personal tax return before the tax deadline in 2020.  Along with the return, copies of appraisals and other documents related to the transfer should be included. 

The donor does not pay taxes on the gift amount over the exclusion each year.  Instead, tax may come due when the donor reaches the lifetime exclusion gift tax limit.  For 2018 and 2019, that amount is $11.2 million.

A gift, according the IRS, is the transfer of money or property to a party in which the donor (person giving the gift) does not receive anything of equal value in return.  The gift can be all or part of the value in the transfer.  For example, money may be given and the gift value would be equal to the amount of money.  Similarly, if something was purchased by one individual as a gift for another, the purchase price would be the gift value.  Gifts can also be given by greatly reducing the sale price of an item below fair market value (such as a house or a car).  The gift is the difference between fair market value and the price paid.

There are a few exclusions to the gift rule.  First, there is an annual exclusion amount.  For tax years 2018 and 2019 an individual may gift up to $15,000 per recipient before a Gift Tax Return is required.  Other excluded gifts include tuition or medical expenses paid for someone, gifts to your spouse, or gifts to a political organization.  These gifts are not tax deductible.  The only deductible gifts are those made to qualifying charitable organizations. 

Here are some common scenarios related to gift tax returns:

Parents decide to gift a child the funds for a down payment on a home.  In this situation, if the amount given is greater than $15,000, a gift tax return should be filed along with the parents’ annual tax return the following year.  If the money is given as a loan, no Gift Tax return is required.  However, if interest is being collected on the loan, the parents should claim the interest income on their personal tax return in each year it is received.  Please note that according to the IRS, a loan that does not require interest payments is considered a gift. 

A home is sold to a friend or family member at a deep discount.  An off-market deal that takes into account no need for realtor fees being paid (for example, you do not list your home with an agent and instead sell it for slightly less than fair market value to account for not paying realtor fees) is not a gift.  However, if you sell a home with a value of $250,000 for $150,000, you have given a gift of $100,000.  In this situation you would need to provide an appraisal of the property at the time of the sale and any additional documentation related to the sale (such as the Settlement Statement) along with the Gift Tax return.       

If you buy a car for someone and put it in their name.  Often parents or guardians buy cars for their kids when they reach driving age.  However, the vehicle is often left in mom or dad’s name and is therefore still the property of the purchaser.  If that car were to be put in the name of the child, then the purchase price of the car would be considered the gift amount.  If the parents were to buy a car and many years later (such as when the child graduated from college) decide to put the title in the child’s name, the gift amount would be the value of the car at the time of transfer.  The original purchase price would not matter.     

If you are giving a gift to your child and his/her spouse.  Sometimes parents give a sizable gift to their child and his/her spouse.  In this instance, each party to the gift is treated separately for tax purposes and a Gift Tax Return is only required if a gift amount of $15,000 is exceeded per person.  For example, a woman wants to gift her son and his spouse the money for a down payment on a new home.  They need $25,000 which is $10,000 over the exclusion limit.  However, for gift tax purposes, the son and his spouse are treated as two separate gift recipients even if they file a joint tax return.  In other words, the woman can give them each $15,000 (for a total of $30,000) before a gift tax return would be required.  If the woman also has a spouse they could give a total of $60,000 before a gift tax return was needed ($15,000 from woman to son and $15,000 to his spouse; $15,000 from spouse to son and $15,000 to his spouse). 

Questions about Gift Tax rules and return requirements?  We’re happy to help!  Call or email our office for more information.