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More than 67 million Americans receive Social Security benefits each month, according to social Security Administration. That’s why even hypothetical discussion of a potential $2,000 federal payment raises practical questions for retirees and people on fixed incomes.
Although no such payment has been approved, past incentive programs provide a useful reference point. Here are three ways the so-called “Trump checks” could affect Social Security benefits, based on expert insight and the behavior of past stimulus payments.
1. $2,000 payment based on past stimulus checks likely won’t be taxed
Frank Grimes, President and Owner Associates Home Loans of Florida Inc.Said that previous stimulus payments were structured in such a way as to avoid tax consequences for Social Security recipients.
“Using previous federal stimulus packages as an example, $2,000 of stimulus payments by Social Security recipients would not be considered taxable income,” he explained. “The CARES Act and other subsequent COVID-19 relief packages included provisions to treat stimulus checks as ‘refundable tax credits’ that, in fact, did not count toward increasing their taxable income for federal tax purposes.”
Grimes said counting the stimulus payments as income may have changed that calculation.
According to Grimes, “Including stimulus payments would require that recipients of stimulus funds be taxed at a higher level than they otherwise would have been including those stimulus payments in their ‘combined income.’
If a $2,000 payment were authorized in the future, its tax treatment would depend on how Congress writes the law, although past stimulus programs provide a reference point.
2. A hypothetical payment will not reduce Social Security retirement benefits
Social Security retirement benefits are based on a person’s work history and lifetime earnings, not their current income or savings.
Caroline Recker, a registered Social Security analyst, said that although no $2,000 payment has been approved, previous stimulus programs provide a clear reference point: “Meaning it will not count as income for Social Security, SSI or Medicaid. The exact treatment will depend on final legislation, but historically these payments have been excluded from income.”
In practical terms, this means that such a lump sum payment will not reduce the retiree’s monthly Social Security check.
3. SSI and other income-based benefits may depend on the fine print
The situation is different for people who receive Supplemental Security Income (SSI) or other income-based benefits, including Medicaid, SNAP or the Medicare Savings Program.
During the COVID-19 stimulus programs, federal agencies issued specific guidance on how those payments will be treated.
“Prior stimulus payments were also excluded from counting as income when received under income-based programs; however, the Social Security Administration and other federal agencies issued guidelines during the COVID pandemic stating that stimulus payments will not be used to calculate recipients’ SSI benefits, nor will they prevent recipients from receiving Medicaid, SNAP, or the Medicare Savings Program at the time of receipt,” Grimes said.
Those protections were temporary. “Stimulus funds were also excluded from being considered as ‘countable’ resources, usually for a limited time (up to one year), allowing recipients to spend the money on essentials without losing their benefits,” Grimes explained.
After that exclusion period ends, the unspent funds can be counted towards the SSI asset limit under the existing rules.
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No $2,000 stimulus payments have been approved. If one were ever authorized, previous incentive programs provide a framework, not a guarantee.
For most people receiving Social Security retirement benefits, the lump sum payment probably won’t affect monthly checks. For those receiving SSI or other income-based benefits, the impact will depend on the details written into the law.
As with previous stimulus programs, the fine details will matter.
