Stimulus for the Rest of Us

Stimulus for the Rest of UsYes! We have some good news from our lawmakers. A big stimulus is coming. Families are hurting as many businesses shut down or scale back to prevent the spread of COVID-19. This is a huge problem and the government is working hard to prevent the US economy from crashing into a depression. This stimulus package will send much-needed money to every part of the economy – big businesses, small businesses, and individuals. The bill passed in the Senate on Wednesday. It’ll go to the House of Representatives next and the president after that. This will be a massive $2 trillion stimulus package. Let’s see where the money goes and how much help regular people will get.

*Depression:

    1. Over 10% decline in GDP or
    2. A recession lasting longer than 2 years.

Big picture

Families need help and we need it now. The Senate took a few days to pass the bill, but I think it’s worth it. This is a bipartisan bill with some oversight. That’s how a functioning government should work. Here is how $2 trillion gets divided, roughly.

  • $500 billion in loans to big companies. The bill will create a congressional oversight commission to monitor how the money is doled out.
  • $350 billion in small business loans.
  • $250 billion in expanded unemployment benefits. There should be something for gig workers and freelancers here.
  • $130 billion to hospitals.
  • $150 billion to state and local governments.
  • $250 billion in direct payment to individuals and families.
  • $4.3 billion to the CDC.

The stimulus bill has a provision to prevent the president and his family, lawmakers, and other major figures from getting loans from the program. Mar-a-Lago won’t get any money this round.

This doesn’t quite add up to $2 trillion, but there are bits and pieces going out to all parts of the government and economy. For example, the Peace Corps will get $88 million and student loan payments are deferred for 6 months.

*You can read the bill yourself here.

Stimulus for the rest of us

What about us regular people? What are we getting? Let’s dig into how much individuals and households will receive from this stimulus bill. They’ll look at your 2019 tax return to determine the benefit. If you haven’t filed taxes yet, they’ll use your 2018 tax return.

*Important* There is a phase-out. Dig up your tax returns and look up your adjusted gross income (AGI) to see if you’ll get a check.

  • $1,200 for single tax filers who made less than $75,000. The amount would be reduced if your income was above $75,000. If you made over $99,000, no soup for you.
  • $2,400 for married, filed jointly. The phase-out begins at $150,000, AGI. If you made over $198,000, no stimulus.
  • $500 for each qualifying child. I think this is also subjected to the phase-out.

If you haven’t filed a tax return for 2019 yet, then the phase-out could be important. In 2018, our AGI was 40% higher than in 2019. My blog income was higher than usual in 2018. Also, 2019 was a bad year for our rental income. Actually, it doesn’t matter that much to us because our AGIs were below $150,000 for both years. Anyway, check your tax returns if you’re close to the phase-out amount.

Unemployment insurance

Here is another part that will help workers who lost their job. The stimulus package adds $600/week to unemployment benefits for 4 months. This is in addition to what laid-off workers normally get. This is really good. It’ll bring many workers’ income back to their normal level.

The bill would also add up to 13 weeks of extended unemployment benefits. Normally, your state covers 12 to 28 weeks of unemployment.

The bill would also benefit gig workers, freelancers, and self-employed. Normally, this group of people does not qualify for unemployment benefits. I’m not sure how this will work, though. I guess it depends on your state. I’m trying to get more details on this, but I couldn’t find much info. I’ll update this post soon.

This part covering gig workers is going to be tricky. Most gig workers have more than one gig. For example, one gig worker may drive for Uber, rent out a room on Airbnb, do some pet sitting, and charge scooters. All of those income streams decreased tremendously due to social distancing and schools shutting down. Most gig workers are still making money, but much less than before. Can they qualify for some benefits?

What about sole proprietors? My business income is way down in March. I don’t have any employees so my expense is pretty low; however, income is down. We’ll have to wait to read the bill to figure it out.

*Update*

There is more information out, but it’s still unclear. For gig workers that lost a lot of their income, it sounds like you should stop working gigs and file for unemployment. Once things are back to normal, then go back to your gigs.

For self-employed and sole-proprietor, I have no idea. It sounds like you can say you’re looking for a job (self-certified) and can claim unemployment. You’ll have to send in tax returns and 1099 to verify that you had income in previous years. This part is very confusing.

How will you spend it?

We filed a joint tax return and have one child so we should receive $2,900. I know we’re really lucky compared to many families. We have several streams of income. Even if a few are disrupted, we can still pay the bills. Here is a quick recap.

  • Online income – drop by over 50%. Nobody wants to read about early retirement right now or sign up for anything new.
  • Rental income – okay for now. We have 2 tenants. Their jobs are secure, as of right now.
  • Dividend income – some companies will cut their dividends.
  • Real estate crowdfunding – sponsors are deferring payouts.
  • Gig work – Lime Scooter froze operations in most cities so this income dropped to $0.
  • Mrs. RB40’s paycheck – this is solid. She is working from home and her job is secure.

We live modestly so we won’t have to make any big change to reflect declining income for now. If things keep deteriorating, who knows?

The stimulus check will come in handy, though. I’ll spend half of it to support the local economy and save half in case our tenants need help. Mrs. RB40 is working at the dining table and it isn’t a good working environment for her. I’ll order a loft bed from a local company and set up an office for her in our son’s room. He doesn’t spend much time there anyway. We’ll also spend more on take-out to support our favorite restaurants.

What about you? How will you use your stimulus check?

Image credit: Alexander Mils

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.

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