December 23, 2020

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Top Story

What’s in the COVID-19 Stimulus Package?

Nine months after the first major COVID-19 stimulus bill was passed, Congress struck a deal to provide $900 billion in aid to Americans struggling from the pandemic.

The long-awaited package includes $600 stimulus checks for many Americans, $300-a-week enhanced unemployment benefits through March, as well as help for gig workers and freelancers. The government will also continue to halt payments on federal student loans and revive the Paycheck Protection Program (PPP), which offers loans to small businesses.

While this is the second-largest stimulus deal in U.S. history, it’s less than half the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act that was passed in March when the economic repercussions from the COVID-19 virus first rippled across the country.

Though delayed and smaller than anticipated by some, the latest $900 billion stimulus package still represents much-needed relief to many who have been financially devastated by the pandemic and subsequent recession. Some 7.8 million Americans have fallen into poverty since June, according to one academic study.

Here’s a deeper look at the various measures in the stimulus package.

Who Qualifies for the Second Stimulus Checks

The coronavirus relief provisions include direct payments to many individuals. Adults who made up to $75,000 in 2019 will receive a $600 check, while a couple who made up to $150,000 and filed their taxes jointly will receive a $1,200 check. Heads of households who make up to $112,500 will also receive the full $600.

Those with any child dependents qualify for an additional $600 per child. Children who are 17 years or older are not expected to qualify. That means a family of four--two adults and two children under the age of 17--would receive a one-time payment of $2,400. The checks from earlier this year were $1,200 for individuals, $2,400 for couples and $500 per dependent child under 17.

Americans with annual incomes above the $75,000 (for individuals) and $150,000 (for joint filers) thresholds will qualify for reduced checks, while individuals who make more than $87,000 and couples who earn more than $174,000 would not qualify at all.

Here’s a table that breaks down the direct payments by income levels (the check amount decreases by $5 for every $100 over the income threshold):


One major change since the CARES Act is that “mixed-status households” can now qualify for stimulus checks. Households in which one spouse doesn’t have a Social Security Number (SSN)--often unauthorized immigrants--can qualify to receive a $600 check, as well as additional $600 payments for child dependents. This change can be retroactively applied to the CARES Act checks from earlier this year, meaning they can be claimed in 2020 tax filings.

Seniors whose only income is from Social Security, as well as railroad retirees and veterans who rely on disability payments, will also receive the stimulus checks.

How Will I Get My Second Stimulus Check?

The payments from the CARES Act were made roughly two weeks after the legislation passed. Treasury Secretary Steve Mnuchin has said that the new payments will begin being disbursed the week of Dec. 28.

Similar to the CARES Act payments, the latest round of checks will also be directly deposited to bank accounts, as long as holders have their bank details filed with the Internal Revenue Service (IRS). Those who don’t have a direct deposit set up with the IRS will likely receive their checks by mail.

Individuals who didn’t file taxes in 2019 can visit and register for the payment. Americans can also claim the payment as well as the initial one from earlier this year as a “recovery rebate credit” on their 2020 tax filings. After the first round of payments, the IRS sent letters to 9 million individuals informing them that they qualified for checks but didn’t receive them.

Those whose financial situation has changed--say they don’t qualify based on their 2019 income but have lost wages or jobs and will have lower income in 2020--can also make a claim with the IRS in their 2020 tax return. The IRS will add the payment amounts to their tax refunds.

The stimulus payments will not be taxable, meaning Americans will not have to declare the money in their 2020 tax filings.

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COVID-19 Unemployment Benefits

For unemployment insurance, the bill extended the number of weeks that Americans can collect benefits and also added a $300-a-week supplement through March.

Most states provide unemployment benefits for 26 weeks. The CARES Act extended the time period by another 13 weeks, and the latest bill adds another 11 weeks. That means Americans who qualify for unemployment insurance may be able to now receive a total of 50 weeks in benefits. The six states that don’t offer 26 weeks are Alabama, Arkansas, Florida, Missouri, North Carolina and South Carolina. Individuals should check out unemployment resources in their state.

Those who receive weekly benefits from their state will get an additional $300 from the federal government. Called the Pandemic Emergency Unemployment Compensation, the payments will be made from around the end of December through March 14.

The weekly supplement is less than the $600-a-week enhancement the CARES Act provided. President Donald Trump’s Lost Wages Assistance program paid an additional $300 a week in benefits for six weeks beginning mid-September.

Unlike the stimulus checks, individuals must pay taxes on their unemployment benefits.

COVID-19 Jobless Benefits for Gig Workers, Freelancers

The bill will expand unemployment benefits to those who have exhausted their state benefits or who don’t qualify for such benefits because they hold multiple jobs.

Gig economy workers, freelancers and independent contractors--or individuals who earned at least $5,000 last year in self-employment income--can get an additional $100 a week through March 14, in addition to the $300 payments.

What the New Bill Says About Student Loans

The CARES Act in March suspended all payments on government-held federal student loans, froze all interest, and stopped collection efforts. The measures were originally set to expire at the end of September but have been extended twice.

The student-loan relief measures are set to end on Jan. 31, 2021. That means borrowers of government-held federal student loans will have to resume their payments after that date.

The new bill did not include an extension of that suspension. However, some experts and borrowers are waiting to see if President-elect Joe Biden pushes an executive order on student-debt forgiveness once he takes office in January.

About 41 million federal student loan borrowers have had their loan interest suspended. Some 33 million Americans have halted their payments. Meanwhile, about 8 million are in default but have not been contacted by collection agents.

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How the New Bill Helps Small Businesses

The $523 billion Paycheck Protection Plan (PPP) was the centerpiece of the CARES Act to aid small businesses. The loans are forgiven if businesses maintain jobs, rehire laid off workers, and if most of the money goes to payroll. In April, President Trump expanded the PPP, adding another $450 billion in potential funding.

The new stimulus package passed in December will continue PPP with another $284 billion injection. The program was expanded to include nonprofits, as well as local newspapers, TV and radio broadcasters. The program will also dedicate $15 billion for live venues, independent movie theaters and other cultural institutions.

Other Measures in the Stimulus Bill

Here are some other measures in the bill that could have an impact on Americans:

1. Ban on Surprise Medical Bills

Certain surprise medical bills will likely be forbidden. Such bills occur when an out-of-network medical provider is unexpectedly involved in a patient’s care. Starting in 2022, hospitals will have to work with insurers to settle on a fair price, rather than let patients be on the hook for large fees.

2. Eviction Relief

The bill sets aside $25 billion for rental assistance. A moratorium on rental evictions will be extended until the end of January. The eviction ban had previously gone through the end of 2020.

3. Virus Assistance

The package will also include $20 billion for vaccine purchases, $9 billion for vaccine distribution and $22 billion for COVID-19 testing and tracing programs.

The Takeaway

After months of back-and-forth wrangling, Congress finally reached an agreement on a $900 billion stimulus bill to alleviate hardships due to the pandemic business interruptions.

The package is much smaller than the $3.4 trillion legislation passed in the House in May and $2.2 trillion passed in September. Both packages were rejected by the Republican-controlled Senate and the White House for being excessive. Meanwhile, a $1.8 trillion bill offered by President Trump before the November election was rejected by Democrats for being insufficient.

However, stimulus checks, additional unemployment benefits and small-business loan programs are all considered key measures necessary to tackle the economic slowdown and household financial stress that continues to weigh on many Americans.

Not-So-Breaking News

  • Shares of Peloton (PTON) climbed yesterday after the company announced plans to acquire Prector, an exercise equipment manufacturer, for $420 million. As part of the deal, Peloton will gain access to over 625,000 square feet of manufacturing space, which will help the company meet booming demand for its bikes and other products.
  • MGM Holdings, the movie studio famous for the James Bond franchise, as well as titles like Legally Blonde and A Star Is Born, is exploring the possibility of a sale. The studio has a market value of about $5.5 billion, including debt. Though nothing is set in stone, potential buyers could include international media companies, private equity firms, or blank check companies.
  • Yesterday, IAC (IAC) shares spiked after the media conglomerate announced that it will spin off its stake in the video software company, Vimeo. After the deal closes, Vimeo will become a separate, publicly traded company.
  • Honeywell (HON), a technology conglomerate, will acquire Sparta, the software company, for $1.3 billion in cash. Sparta has about 250 employees and its customers include some of the world’s largest pharmaceutical and medical device companies.
  • US GDP climbed at a 33.4% annualized rate during the third quarter, a record pace. This followed a 31.4% contraction during the April-June quarter.
  • Need a last minute gift idea? Check out our financial gift guide 2020 and give the gift of financial knowledge.

Financial Planner Tip of the Day

"Whether you own individual stocks or stock funds (mutual funds or exchange-traded funds), the stock market can be used to generate passive income. It helps to understand that a stock can make money in two ways: First, through price appreciation, which is a stock growing in value over time. Second is through dividend payments, which are cash payments made by some (but not all) stocks and funds."

Brian Walsh, CFP® at SoFi

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