How Much Was the Third Economic Impact Payment?

The third economic impact payment was part of the American Rescue Plan Act, passed in March 2021 to provide financial relief during the COVID-19 pandemic. Millions of Americans received this direct payment to help cover essential expenses and stimulate the economy.

Amount of the Payment

Each eligible individual received $1,400, while married couples filing jointly received $2,800. The payment was based on adjusted gross income (AGI) from the most recent tax return, either 2019 or 2020.

As an advance refundable tax credit, the payment was not taxable and did not affect future refunds. Recipients were not required to repay it, even if their financial situation improved. The IRS determined eligibility and issued payments automatically using tax records, ensuring those who had filed returns or received Social Security or Veterans Affairs benefits were included.

Allocation for Dependents

Unlike previous stimulus payments, which only covered dependents under 17, the third payment provided $1,400 for all dependents claimed on a tax return, regardless of age. This included college students, disabled adults, and elderly parents.

For example, a filer claiming both a college-aged child and an elderly parent would receive an additional $2,800. Payments for dependents were sent to the taxpayer who claimed them. The IRS used the most recent tax return on file, meaning changes in dependent status could affect the amount received.

Income Limits

Eligibility was based on AGI, with full payments going to individuals earning $75,000 or less, heads of household earning up to $112,500, and married couples filing jointly earning up to $150,000. Payments phased out at $80,000 for individuals, $120,000 for heads of household, and $160,000 for joint filers.

Unlike previous stimulus rounds, where payments gradually decreased beyond the threshold, this phase-out was more abrupt. Taxpayers who saw a drop in income after their most recent return could claim the payment through the 2021 Recovery Rebate Credit when filing their 2021 tax return.

Delivery Methods

The IRS distributed payments primarily through direct deposit for those who had provided banking details on a recent tax return or through IRS tools like the “Get My Payment” portal.

For those without direct deposit information, payments were sent as paper checks or prepaid debit cards. Some recipients received an Economic Impact Payment (EIP) Card, a Visa-branded debit card issued by MetaBank, which could be used for purchases, cash withdrawals, or transfers to a bank account. Some mistook these cards for junk mail, causing delays in accessing funds.

Tax Reconciliation

Since the third economic impact payment was an advance on a 2021 tax credit, it was not taxable. However, taxpayers had to reconcile the payment when filing their 2021 return to ensure they received the correct amount based on their final AGI and dependent status.

If the IRS underpaid a taxpayer—such as in cases where a new dependent was added after the last tax return on file—the difference could be claimed through the Recovery Rebate Credit. Unlike other tax credits, there was no repayment requirement if a taxpayer’s income later exceeded the eligibility threshold.

Claiming Unreceived Funds

Some eligible individuals never received their payment due to IRS processing errors, incorrect banking or mailing information, or changes in filing status. These taxpayers could claim the missing amount through the Recovery Rebate Credit when filing their 2021 tax return.

To verify eligibility, the IRS issued Notice 1444-C, detailing the payment sent. If discrepancies existed, taxpayers could use IRS Form 1040 or 1040-SR to claim the credit. Those who had not previously filed taxes but were eligible could still submit a 2021 return to receive the funds. However, the deadline for claiming the credit was tied to the standard tax filing window, meaning those who missed it would likely forfeit the payment.