ROCHESTER, N.Y. (WROC) — CPA Michelle Staebell of the New York State Society of CPAs discussed some of the best ways to use your stimulus funding from the American Rescue Plan Thursday.
Individual Americans making up to $75,000 per year will receive $1,400, and couples making up to $150,000 per year will receive $2,800 from the federal government.
For many, the stimulus will help pay for things like rent and bills. Others will use the funding to put gas in the car and feed their family. “It’s tax-free money to a taxpayer, and it would be great to put it back into the community, whether that’s putting food on the table or buying takeout from a restaurant,” Staebell said. “If a local business can be supported, it would support the entire community as a whole.”
Many people have not had their income impacted during the pandemic. Staebell said they may want to consider investing some of their stimulus funding. “It’s tax-free money and contributions into IRAs, Individual Retirement Accounts can still be made for the 2020 tax year. So if a taxpayer puts money into a Roth IRA, they are taking tax-free money, investing it into their own retirement account, and it will grow tax-free, which is even more beneficial to a taxpayer. So whether it’s investing in a retirement account or paying off some debt, there’s a lot of opportunities for taxpayers right now to have any extra money in their pocket.”
Staebell said people also have an opportunity to build up their savings—which can really make a difference when the unexpected happens. “I think this pandemic was an eye-opener to a lot of people. They say you should have three to six months’ worth of family expenses in a savings account and I don’t know how many people had that before this pandemic.”
From a tax standpoint, there is added benefit to using some stimulus funding for a charitable donation. “The IRS has been encouraging donations for the 2020 tax year,” Staebell noted. “They are allowing $300 deductions on taxpayer returns, even if a taxpayer doesn’t itemize their deductions. And the IRS has increased that to $600 for 2021.”
Staebell also reaffirmed the shifting tax-filing deadline—from April 15 to May 17 for both the federal and New York State tax return. Any payments owed also shift to May 17.