Americans are saving, rather than spending, their stimulus checks

Americans are saving much of their stimulus checks or using them to pay down debt rather than spending the money, according to a new survey from the New York Federal Reserve.

On average, households are using or intending to use 34% to pay down debt and saving 42% of the stimulus payments they received from the most recent Covid relief bill, which passed in March, which are worth up to $1,400 per person. Only about 25% of the checks are going to spending, according to the survey.

At the time of the survey, households said they had received $3,162 on average. The Internal Revenue Service had sent out about 130 million payments by the end of March, but more are on the way.

Lawmakers narrowed the scope of the most recent stimulus payments, intending to cut off higher-income families who may not need the money to pay bills and put food on the table. In earlier rounds, some families earning more than $200,000 a year were eligible to receive some money. But the new round cuts off anyone earning at least $160,000 — regardless of how many children they have.

However, the survey found that families receiving the third round of payments are using the money in a very similar way to the earlier rounds– though a slightly bigger portion of the payments was spent.

In January, households spent 26%, and the remainder was split between savings and paying down debt. Those payments were worth up to $600.

Last June, people were receiving up to $1,200. Those who responded to the New York Fed’s survey at that time said they spent 30%, saved 36% and used 35% to pay down debt.

Still, lower-income households are more likely to spend the money than save it during the most recent round. Those earning less than $75,000 a year said they are spending or expect to spend 27% of their payments, while families earning more would spend 24%.

Who gets a payment?

The new payments worth up to $1,400 per person are expected to reach 85% of households, according to the White House. Families will receive an additional $1,400 per dependent, so a couple with two children could receive up to $5,600. Unlike prior rounds, families will receive the additional money for adult dependents over the age of 17.

The full amount goes to individuals earning less than $75,000 of adjusted gross income, heads of households (like single parents) earning less than $112,500 and married couples earning less than $150,000. Then the payments gradually phase out as income goes up.

Lawmakers narrowed the scope of the payments this time so that not everyone who received a previous check will be sent one now. The measure cuts off individuals who earn at least $80,000 a year of adjusted gross income, heads of households who earn at least $120,000 and married couples who earn at least $160,000 — regardless of how many children they have.

On what year are the income limits based?

The new income thresholds will be based on a taxpayer’s most recent return. If they’ve already filed a 2020 return by the time the payment is sent and it has been processed, the IRS will base eligibility on their 2020 adjusted gross income. If not, it will be based on the 2019 return or the information submitted through an online portal set up last year for people who don’t usually file tax returns.

If your 2019 income was less than your pay in 2020, you will not owe back any money. But if your income fell in 2020, filing your tax return now — before the payments go out — may mean you’ll get a bigger check.

Who is still waiting?

About 25 million more payments will have been delivered by the end of this week, including those for very low-income Social Security recipients.

Those who don’t have 2019 or 2020 tax returns on file — typically because their incomes are below the threshold for filing — will still get the money automatically. But the payments didn’t start going out to those people until last weekend. A lot of those electronic payments are expected to reach accounts on April 7. The delay affects those who receive Social Security, Supplemental Security Income or Railroad Retirement Board benefits.

People who receive Veterans Affairs pensions and don’t have recent tax returns on file are also still waiting for their stimulus payments. The IRS said Wednesday that it was continuing to review data received for veteran benefit recipients and that those payments could be processed by the end of the week, arriving in accounts electronically by April 14.

Other households that are eligible for the new round of payments but haven’t filed 2020 or 2019 tax returns and did not use the IRS’s online portal for non-filers last year could also still be waiting. The agency is encouraging them to file 2020 tax returns as soon as possible in order to receive their payments.