How does stimulus payment income phaseout work when there are children?
The CARES Act (text here), section 2201, provides economic stimulus payments. It provides that individuals get ,200, and joint filers get ,400, plus 0 for each qualifying child (16 or under). It also provides an income phaseout that reduces the credit "by 5 percent of so much of the taxpayer’s adjusted gross income as exceeds" a certain level -- ,000 for single filers or 0,000 for joint filers. This means that, without children, one's payment will reduce to 0 if one's AGI exceeds ,000 (,000 + ,200 / 5%) for single filers, or 8,000 (0,000 + ,400 / 5%) for single filers.
My question is, how would this work for a family that is filing jointly with two dependent qualifying children? If their AGI is below 0,000, they receive ,400 (,400 + 2 * 0). Does their payment still reduce to 0 at an AGI of 8,000, or does it slowly reduce until an AGI of 8,000 (0,000 + ,400 / 5%)?
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The text of the provision (subsection (c) of new section 6428) says:
(c) Limitation based on adjusted gross income.—The amount of the credit allowed by subsection (a) (determined without regard to this subsection and subsection (e)) shall be reduced (but not below zero) by 5 percent of so much of the taxpayer’s adjusted gross income as exceeds—
(1) 0,000 in the case of a joint return,
(2) 2,500 in the case of a head of household, and
(3) ,000 in the case of a taxpayer not described in paragraph (1) or (2).
While people are quoting ,000 and 8,000, those aren't actually in the text of the law, and US courts look first to the actual text of the law. By the text, a couple with 2 children and an AGI of 8,000 has an initial rebate of ,400, which is then reduced by 5% of ,000 (or ,400) to give a net rebate of ,000. The Congressional Research Service produced a summary of the rebate, and their chart also shows that a married couple with two children gets a rebate well after hitting 0,000 in AGI.
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