With a July 31 summer recess deadline looming, Senate Republicans have released a proposal for a second coronavirus stimulus package: the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act.

Many Americans can expect another $1,200 payment from the federal government if and when the Senate’s relief proposal gets approved. Families with dependents may also see an extra payment, thanks to expanded payment rules offered by Republican leadership.

Here’s what the HEALS Act proposal offers for taxpayers with dependents.

What to Expect From the HEALS Act

Unlike the first round of economic impact payments, which restricted dependent payments to children under age 17, the newest Senate proposal calls for a $500 payment for dependents of all ages. 

The dependent payment would be added onto the $1,200 direct payments planned for individuals earning $75,000 or less. 

Payment calculations are again slated to be based on your most recent tax return. If you filed before the adjusted July 15 deadline, your payment would be based on your 2019 tax return; if you requested an extension, your 2018 tax return would be referenced to determine your payment.

While this stimulus plan is far from finalized, you can determine your eligibility for the expanded dependent payment with our HEALS Act stimulus check calculator.

How the CARES Act Excluded Some Dependents

The CARES Act, passed in late March, offered $500 per dependent, but was only available to dependent children under age 17. This excluded students and young adults who weren’t yet filing their own taxes, along with households with adult dependents. 

More than 15 million such dependents were excluded from the CARES Act payments, according to the Center for Budget and Policy Priorities analysis of Census Bureau data. 

Young adult dependents excluded by the CARES Act have been particularly vulnerable to the economic impact of the pandemic. The unemployment rate for people ages 16 to 24 was 25.3% in May 2020, far higher than the rate for any other age group, according to the Pew Research Center. 

Other Options for Relief

The Democrats’ plan that passed in the House of Representatives in May (the HEROES Act) had called for payments of $1,200 per qualifying child with a cap of three on top of a repeat $1,200 payment for adults. 

But two other proposals discussed this summer also included enhanced payments for dependents: 

• The Monthly Economic Crisis Support Act, proposed by Senate Democrats, sought to provide monthly stimulus payments, including $2,000 per child with a cap of three.
• Representative Tim Ryan’s (D-OH) Emergency Money for the People Act in the House of Representatives also called for monthly stimulus payments, with $500 per dependent up to three children. 

Both proposals included higher thresholds for household income in order to be eligible for stimulus payments. The HEROES Act would have retained the $75,000 adjusted gross income limit before phasing out benefits.

Each of the previous proposals focused on providing dependent payments only to households with children under 17.

Why Dependent Payments Are Still Uncertain

An expanded dependent payment benefit may be a part of the plan for the second stimulus package, but it’s not yet a reality.

It’s uncertain whether Democrats and Republicans will come to an agreement in the Senate this week—let alone get approval from the House of Representatives and President Trump—prior to August 1, when Congress’s month-long recess begins. The House of Representatives’ recess begins August 1, with the Senate break starting August 7.

Although a full text of the bill hasn’t been released, the HEALS Act contains some items that may trip up the negotiations. Funding of $1.75 billion for a new Federal Bureau of Investigations headquarters is one head-scratcher as it relates to immediate coronavirus economic relief, but remains a priority for President Trump.

The reduction of weekly unemployment benefits provided by the federal government from $600 weekly to $200 is another point of concern. But if an agreement isn’t made by Friday, those benefits will lapse altogether.

Even if the HEALS Act is approved as is, there’s still the issue of distributing the anticipated direct payments to taxpayers. The first round of economic impact payments started to arrive via direct deposit about three weeks after the CARES Act was signed.

As of July 17, the IRS has delivered more than 159 million economic impact payments nationwide. But the process hasn’t been without its challenges. A report from the Government Accountability Office found that in the first month of stimulus payment delivery, as many as 365,000 low-income Americans didn’t receive the payments they expected for their dependent children.

Fortunately, the Treasury and the IRS have already established the system for sending out direct payments, so you may see yours more quickly in this second stimulus round.

Yesterday, Senate Leader Mitch McConnell (R-KY) announced the HEALS Act on the Senate floor and a number of Senators proposed their respective parts.

One of the most await parts of the future bill is the next stimulus check, which fell under the purview of Senator Chuck Grassley (R-IA), the Chairman of the Senate Finance Committee.

Senator Grassley’s office would later release the legislative text for the American Workers, Families, and Employers Assistance Act, which provides for the second recovery rebate.

In many ways, the second stimulus check is a repeat of the first. In some ways, it’s slightly more generous. Let’s take a closer look.

How The Next Stimulus Check Is The Same

The Base Amount of the Check

The amount of the check is the same – single filers get $1,200 and joint filers get $2,400. You get an additional $500 per dependent, though the definition of a dependent was expanded (more on that below in the section on differences).

The income limits, which refer to adjusted gross income (AGI), are:

• Single filers – $75,000
• Joint filers – $150,000
• Heads of Household – $112,500

If you have an AGI greater than those limits, your check is reduced by 5% of your AGI above the limit.

For example, a single filer with an AGI of $80,000 would see a reduction of their check of $250. 5% of $5,000, the amount over $75,000, is $250.

The Tax Year Used for Income Determination

The second stimulus check will also use the 2019 tax year income for calculating your check amount, if available. If they do not have that information they can still use 2018 tax year information as an alternative.

This is the same as with the Cares Act, except the Cares Act also extended the due date of your 2019 tax return to July 15th. This meant that when the IRS was sending out the checks, a lot of Americans hadn’t yet filed their tax returns.

Your second stimulus check may be for a different amount depending on how much your income changed from year to year.

The Tax Structure of the Check

Both checks are advances on a refundable tax credit for the 2020 tax year. This means that the bill would create a new refundable tax credit based on your income and will pay that to you now as an advance.

The credit is based on your 2019 tax return, if you filed one, otherwise it can use your 2018 tax return as a default. It is widely expected that if you don’t file a tax return, you can update your information on the IRS Non-Filers: Enter Payment Info Here form if you didn’t do so already for the first check.

It Is Protected Against Federal or State Debts

The second check will also be protected against federal or state debts, with the exception of past due child support payments.

How The Next Stimulus Check Is The Different

The key difference between the first and second check has to do with three areas.

Expanded Definition of a Dependent

With both stimulus checks, you get $500 for each dependent regardless of their age. In the Cares Act, you only received an extra $500 per dependent if they were a qualifying child for the purposes of the Child Tax Credit. This essentially only applied to children under the age of 17.

This left out a lot of dependents, most notably children in college who are still dependent on their parents but who are older than 16 and elder family members. The American Workers, Families, and Employers Assistance Act removes any age qualification.

Deceased & Incarcerated Explicitly Excluded

The second stimulus check will not be given to those who died before January 1st, 2020 or those who are in jail for the entirety of 2020.

The Cares Act didn’t include any language covering this but the Treasury Department took away payments, and canceled uncashed checks, to these two groups. The bill now clearly states that both groups are excluded from receiving this second check.

It is Protected Against Creditors & Debt Collectors

The Act would also add additional protections against bank garnishment or levy by debt collectors. In fact, the new law would amend the Cares Act to offer those protections to the first check as well.

How The Next Stimulus Check Differs from Heroes Act

Since Senator Grassley’s bill is, at this point, only a proposal – how will it be perceived by the Democrats?

The Heroes Act was passed by the House of Representatives in the middle of May and it also included a similar stimulus check. As we look towards the negotiations between the two parties, we can use this as a gauge of how contentious this aspect of the bill might be.

The Heroes Act offered up a identical base stimulus check of $1,200 for single filers ($2,400 for joint filers) with the same income limitations. It differed in that it offered a higher $1,200 per dependent addition, with a limit of three dependents.

As we monitor how both parties are responding to the HEALS Act proposals, it doesn’t appear that there is much controversy around the second stimulus check. Of the items proposed in the American Workers, Families, and Employers Assistance Act, the biggest argument appears to be over the reduced federal unemployment insurance benefits.

The proposed bill looks to reduce the federal benefit to 70% of an employed worker’s lost wages. Since this is going to be difficult for many states to implement, the bill would first provide a $200 per week bebefit through September as the states revamp their systems to support a percentage based benefit.

To make matters even more complicated, the bill is part of a series of bills that will make up the HEALS Act. This likely sets up a bit legislative battle that will be difficult to resolve before the Senate is scheduled to go to recess on August 7th.

Additional Resources

Next Stimulus Package Released Today: $1,200 Stimulus Check, Reduced Unemployment Aid In HEALS Act

Next Stimulus Package Showdown: The Three Key Conflicts In The Next Stimulus Bill

How Soon Could You Get A Second Stimulus Check?

Second Stimulus Check Income Limit Will Likely Be Higher Than $40,000

Next Stimulus Bill Will Likely Have These Three Major Changes

Second Stimulus Checks Should Be Recurring And Direct, Urge 156 Top Economists