What is a stimulus check?

1 min readLast updated November 10, 2023by Rachel Carey

Stimulus checks have become quite a high-profile topic in recent years. So, what exactly are they, how do they work, and who gets them?

In basic terms, a stimulus check is a payment made by the government to you as a taxpayer. The aim is to encourage greater spending and kick-start the economy during a downturn. The most recent and large-scale example of this happened in 2020 when the US government approved a bill to send citizens stimulus payments as relief from the economic impact caused by the COVID-19 pandemic.  

How do stimulus checks work? 

Stimulus checks are either mailed to you or deposited directly into your bank account. They can also be applied as tax credits to lower your tax bill. Not everyone automatically receives a stimulus check. You have to pass government eligibility criteria before being entitled.  

Although the US government sent taxpaying Americans three rounds of stimulus checks between March 2020 and March 2021 due to the economic hardships caused by COVID-19, this was not the only recent example. They were also issued during the major recession of 2008. 

A National Bureau of Economic Research study revealed that how stimulus money is delivered influences how effective it is at boosting economic activity. Sending checks tends to increase consumer spending, but applying tax credits does not have the same degree of impact. 

Who is eligible for a stimulus check? 

Not everyone automatically qualifies for a stimulus check. The government usually creates eligibility requirements for each payment. So, what shapes their decision? 

  • You must be a US citizen or resident but cannot be a dependent claimed on anyone else’s tax return. 

  • There may be an income threshold based on your individual tax filing status. In other words, if your adjusted gross income (AGI) is over a certain limit, you won’t qualify. 

  • The income threshold rule also applies to married couples filing jointly or separately, heads of households and widowed people. 

How much are stimulus checks? 

The most recent examples of stimulus checks being issued are for the COVID-19 pandemic. In March 2020, tax rebates of $1,200 per adult and $500 per qualifying child were provided. This rebate was phased out for individuals with incomes above $75,000 or couples earning more than $150,000. 

A second phase of stimulus checks was issued in December 2020, and in March 2021, the American Rescue Plan was agreed. This included direct stimulus payments of $1,400 to anyone eligible making less than $75,000 per year. 

What is the current situation with stimulus checks? 

The third stimulus check was issued in March 2021, but now there is a fourth. The big difference this time is that you will only receive it if you live in certain states, because it won’t come directly from the federal government. 

So, although fourth stimulus checks are being issued to people in some states and cities now, it depends on where you live.  

It all started with the American Rescue Plan, which gave $195 billion – a minimum of $500 million per state – to help fund economic recovery across all 50 states. There are, however, stipulations on how and when this money is used. Each state has until the end of 2024 to decide on a spending plan and up to the end of 2026 to use the money. Every state has access to this money, but they need to create a plan for making it work for their citizens.  

How are different states using their fourth stimulus checks? 

Some states use their federal government cash to target particular groups within the community.  

Each state is different, but certain aspects are common, like helping those at specific income levels or enduring particular hardships. Here’s a guide to the states distributing the latest stimulus dollars: 

  • Arizona – the state is giving $2,000 to people returning to work. The Back To Work Program rewards people for getting a job after a period of unemployment. One caveat is they must hold down the new job for at least eight weeks before receiving the money. 

  • California – the Golden State Stimulus II will give Californians making $75,000 or less a one-off payment between $500 and $1,100. 

  • Colorado – focusing firmly on the unemployed, Colorado sent $375 to anyone who received at least one unemployment check between March 15, 2020, and October 24, 2020. 

  • Maine – the state is giving out a disaster relief payment. It’s a kind of thank-you to people in the workforce through the pandemic.  

  • Maryland – anyone who filed for Earned Income Tax Credit in 2019 can get stimulus checks of $500 for families and $300 for individuals. 

  • Missouri – here, the emphasis is on those who worked in mental health, nursing homes or correction facilities. The state is giving this group of workers an extra $250 per paycheck to reward them for their efforts during the pandemic. 

  • New Mexico – here, the state has set aside $5 million for people who didn’t qualify for federal stimulus. Lower-income New Mexicans will get a one-off payment of $750. 

  • New York – the Excluded Workers Fund provides a one-off payment between $3,200 and $5,600 to workers who lost income during COVID-19 but didn’t qualify for aid. 

  • Vermont – the state had a program that gave checks of between $1,200 and $2,000 to frontline workers who served at the beginning of the pandemic.  

Several other states are using the fourth stimulus check to reward teachers specifically – treating the money as a targeted bonus for this vital group. The states doing this are: 

  • Florida 

  • Georgia 

  • Michigan 

  • Tennessee 

  • Texas 

Even some cities are giving out fourth stimulus checks. These currently include: 

  • Chicago 

  • Los Angeles 

  • Pittsburgh 

  • Santa Ana 

  • Seattle 

The bottom line 

The role of a stimulus check is pretty simple – to support workers and consumers during economic hardship and instability.  

They are designed to fill gaps left by unemployment or depressed trading while stimulating consumer confidence. In other words, they are created to get a sluggish economy rolling again.  

The pandemic created quite a complicated stimulus check landscape, but if you’ve missed out on financial support for some reason, don’t worry. The IRS allows you to claim tax credits and lower your liability through compensation. 

Navigating financial matters with confidence can seem like a daunting and time-consuming task. However, it doesn’t have to be this way. A financial advisor can help you make confident financial decisions. Unbiased enables you to find the perfect match and ultimately receive high-quality financial advice. Get started here.

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.