Stimulus Checks for College Students?
The in-coming Biden administration recently announced plans to extend eligibility for an additional $1,400 stimulus payment to adult dependents. This would include college students, as part of his $1.9 billion Covid-19 relief plan.
By now, most Americans received two federal stimulus checks totaling $1,800, while others were excluded. Left out were college students between the ages of 18-24. Estimates indicate that over 8 million undergraduate students were excluded from the two previous stimulus checks, due to their dependent status.
Third Time’s A Charm
However, young adults are hoping they won’t be overlooked a third time. But many remain skeptical – and for good reason. Biden’s proposed $1,400 payments still have to be passed by Congress. Previously, Democrats passed bills with larger stimulus checks for adult dependents in 2020. However, they went nowhere with little support from the Republican side. Now, with a razor-thin majority in the Senate, the new administration will likely have to win support from some Republican senators for this proposal.
Since many college students still rely on their parents financially, economists believe stimulus checks for college students would make a big difference for low and middle-income families.
Filing Status Changes
It’s unclear whether Biden’s proposed expansion to include adult dependents would only apply to the next round of stimulus checks or if it could retroactively apply to previous rounds. Either way, there may be a path for college students to still access the previous two checks.
That’s because the stimulus payments, while initially based on 2019 tax returns, are applied to the 2020 tax year. So, anyone who would be eligible for the checks based on their 2020 income (and filing status) will get the money when they file their taxes this year — including young adults who are newly filing as an independent.
Ross Riskin, a tax professor at the American College of Financial Services, says, “the key is you can’t simply decide to be independent for tax purposes. You have to meet certain requirements, including earning more than $4,300 during the year and providing at least half of your financial support”.
“The reality is that many parents mistakenly claim their college-aged children as dependents when they shouldn’t be,” he says.
But you shouldn’t jump at the chance to file as an independent simply to get stimulus money. The question is whether that $1,800 is more than your parents would get through other deductions and credits by claiming you as a dependent. Those include tax benefits like the Child Tax Credit, Earned Income Tax Credit, and the American Opportunity Tax Credit. It’s best to consider the overall tax impact on the family rather than just a stimulus check.