Ever since the Covid 19 pandemic hit the US, the government has been trying to provide relief by giving stimulus packages. It started with the first stimulus being rolled out in March of 2020 and the 2nd one in Jan of 2021. In both these stimulus packages, college students were left out of the payments, even though many college students have suffered job losses due to the COVID-19 pandemic while still being expected to pay normal tuition and fees.
After coming to power in Jan of 2021, President Joe Biden has been working on a stimulus package that brings additional relief. And in mid-March, he signed the third stimulus bill into law, and for the first time, adult dependents — college students included — are eligible to receive a stimulus check.
College students can receive up to $1,400
Dependent students were denied previous stimulus checks, but with the new bill, students who are at least 17 years old and are claimed as dependents are eligible to receive up to $1,400. That said, the amount students could receive is based on the adjusted gross income (AGI) of the taxpayer claiming them.
Single filers who earn less than $75,000 a year and married joint filers who earn less than $150,000 a year will qualify for the full stimulus amount. Reduced stimulus payments will go to single filers who earn between $75,000 and $80,000 and married joint filers who earn between $150,000 and $160,000. If you’re a college student and the person claiming you as a dependent earns more than that, you will be ineligible for a check — regardless of how much you earn on your own. Also, keep in mind that college students will not be receiving payments directly. Instead, that extra payment will be sent to the taxpayer, claiming them as a dependent. CNET’s third stimulus calculator can help you predict your family’s potential stimulus check amount using the taxpayer’s filing status, AGI, and the number of qualified dependents claimed.
Students may be able to claim additional funds
Dependents over the age of 17 were previously excluded from stimulus payments but may recoup those checks. “Some college students and other young adults may also be able to claim up to an additional $1,800 from the two prior stimulus programs,” says Ven. This $1,800 amount takes into account the first $1,200 check and the second $600 check. You may be eligible if you aged out of the adult-dependent category or underwent a qualifying life event, like graduating college and entering the workforce. If this is the case, you can file for “Recovery Rebate Credit” when you submit your 2020 tax return. There is no penalty for applying; if you’re unsure if you qualify, the IRS has a page where you can check the recovery rebate requirements. Also, check your records and bank statements in case it was already deposited. The first checks were sent out starting in March of 2020, and the second was sent out starting in December of 2020.
How to claim a stimulus check on your 2020 taxes?
A stimulus check is technically a refundable tax credit called the Recovery Rebate Credit. Both rounds of stimulus payments are combined into one credit. The third stimulus check is treated separately. A tax credit is a dollar-for-dollar reduction of your tax bill. A $1,000 credit, for example, cuts your tax bill by $1,000. Some tax credits are refundable, meaning if you don’t have a tax bill large enough to use the full credit, you get the money as a refund. That’s how the recovery rebate credit works. But to get the credit, you have to file a federal tax return, even if your income is too low to be taxable.
Apart from the stimulus, students also stand to gain from the Public service loan forgiveness, already included tax-free student loan cancellation. In contrast, the new stimulus package, the American Rescue Plan of 2021, makes student loan forgiveness through income-driven repayment tax-free through December 31, 2025. Normally, the cancellation of debt is treated like income to the borrower. It is as if someone gave the borrower money to pay off the debt. The borrower received an IRS Form 1099-C to report the canceled debt as income. The canceled debt is subject to income taxes, just like any other income. Certain type of student loan forgiveness is tax-free.
Looking ahead to a brighter future
The past year might have been the worst of our lives, almost everybody’s life has been affected by the pandemic, but we cannot let the pandemic take control of our lives and decide the future of our existence. We have to take control of our lives the most now and not let the difficult times dictate what is in store for us in the future. Though the money might not be too much money, the stimulus you receive can be put to good use if you invest it towards your education and hence a better future. This might be the right start that one might want after the disastrous last year.
Online Masters Colleges (OMC) is one such platform that encourages you to take hold of yourself and invest in education for a brighter future. According to the “Economic Value Of College Majors“, a 2015 study by Georgetown University, college graduates with a bachelor’s degree earn an average annual salary of $61,000 throughout their career, while those with a graduate degree earn $78,000 annually. Hence a master’s degree is always desirable and has a hefty increase in returns on your investment. To help students make the right choices about their master’s degrees, OMC has created the best online master’s program rankings, along with prep guides for GRE, GMAT. Also, in the times that we live in these days, deciding the right way to finance your education is of paramount importance, leading to a significant return on your investment. Hence, here is a link to help you finance your master’s with the best financial aid guide.
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