Millions of Americans collect Social Security and use that income to cover their retirement expenses. If you're a current beneficiary, you may be wondering whether you're eligible to collect some money thanks to the massive stimulus package that was recently signed into law in response to the COVID-19 crisis.
The short answer is that being on Social Security does not exclude you from collecting a stimulus payment. But Social Security may be just one piece of your total income puzzle, and that, in turn, could impact your ability to snag that one-time payment.
How the recently approved stimulus payments work
The new stimulus package is designed to give Americans whose income falls below a certain threshold $1,200 per adult and $500 per qualifying dependent child. Single tax filers with an adjusted gross income (AGI) of $75,000 or less will get the entire $1,200, but from there, it phases out so that single filers earning $99,000 get nothing. For married couples filing jointly, the income threshold to receive a full stimulus payment is an AGI of $150,000. From there, the phaseout begins so that joint filers earning $198,000 get nothing.
Ever since the stimulus package was announced, seniors have been wondering whether getting Social Security excludes them off the bat, and the answer is no, it doesn't -- you can be on Social Security and collect that payment provided your AGI does not surpass the aforementioned thresholds. However, if you have a large amount of retirement savings and have been taking generous withdrawals from your IRA or 401(k), it could be that your total distributions, coupled with your Social Security benefits, put you over the edge and render you ineligible for a stimulus.
The income that's considered when determining your eligibility for a stimulus payment depends on the last tax return you filed. If you didn't yet file your 2019 taxes, your 2018 tax return will be used to see if you qualify. If you're on Social Security but didn't file a tax return in either 2018 or 2019, your eligibility will be based on your annual Social Security benefits statement.
Another thing: If you haven't yet filed a tax return for 2019, but your income in 2019 is lower than it was in 2018, then submitting that return quickly could be a smart move, especially if it puts you right below an income threshold where the stimulus would otherwise phase out or disappear. Of course, if your only source of income is Social Security, you won't have to worry about not qualifying to receive a stimulus payment, as the maximum annual benefit is well below the aforementioned thresholds, whether you're a single tax filer or a couple filing jointly where both parties collect the maximum benefit. It's when Social Security combines with other sources of income, whether it be retirement savings plan withdrawals, pensions, part-time work, small business earnings, or rental income, that you run the risk of reporting too high an AGI to collect this one-time windfall.