Third Stimulus Check: What they mean for 2020 taxes :: WRAL.com
Many tax filers are relieved to know that tax day has been pushed down the calendar to May 17.
Many received assistance from the federal government in the form of stimulus checks and were not sure if they owed any tax as a result.
“The good news is you will not have to pay tax on your stimulus checks,” says Bobbi Rebell, a certified financial planner with Tally, known for their credit card consolidation app.
Rebell says stimulus money is considered a tax credit rather than taxable income.
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She says many people expected to receive a stimulus check but did not get one or did not get as much money as they expected. For those situations, Rebell recommends, “Look on your tax return for something called the Recovery Rebate Credit, and make sure you get credit for the money you deserve.”
Many small business owners used their PPP or “Paycheck Protection Payment” to take care of business expenses. Rebell says, “Those business expenses will be deductible on your business taxes.”
The same goes for paying interest on things like a student loan or a home mortgage. Rebell says there are some situations where people borrow off their mortgage or get a home equity line of credit.
“If you use the money to improve your home, that’s going to be good debt, because you can then deduct that interest,” explained Rebell.
On the other hand, she says, bad debt like credit cards or home refinance loans that are not used for home improvement, is not deductible on your taxes.
Rebell says a lot of people are concerned about taxes on unemployment benefits. The good news is there is a new exemption.
“$10,200 of those unemployment benefits are not going to be taxed. You will get a refund if you already paid,” said Rebell. If you did not have those taxes taken out, you don’t owe it.