If you are like most Americans, you’re probably excited about the latest round of stimulus payments. However, you may be wondering if you’ll need to pay taxes on it, and the answer to that question is no. However, you will need to pay taxes on interest earned as a result of investing this money. Here’s what you need to know:
1. The stimulus is not considered taxable
Your stimulus check is not considered income for tax purposes, which means that you will not need to report it during tax season. However, if you choose to put it in a savings account or invest it in the stock market, you will need to pay taxes on any financial gains. These gains will be filed as capital gains tax rather than income tax.
However, some types of accounts (e.g. 401k, IRA, Roth IRA, etc.) allow you to put a certain amount of money aside without paying taxes on it. Therefore, if you use one of these accounts to invest your stimulus money, you won’t need to pay taxes on the interest.
2. The stimulus can take the form of a tax refund if necessary
If you are unable to get your stimulus check, it may be because you need to file your 2020 taxes first. If this is the case, you will receive your $600 as a tax refund.
3. Little is known about a possible third stimulus
While there has been some discussion of a possible third stimulus check, there is a lot unknown about it. There has been talk of a $2,000 check, but a recent proposal was for $1,400. In any case, this stimulus will not be considered taxable income either.
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If you need help filing your taxes this year, Abbo Tax is the best company to choose. Not only do we have years of experience in the business, but we have worked for many different types of business owners in the San Diego area. So, give us a call or contact us online today!
