In response to the COVID-19 pandemic, stimulus payments were a critical financial relief for millions of Americans. Understanding how these payments interact with federal and local tax obligations is essential. Let’s clarify how stimulus payments may impact Philadelphia taxes and what residents should know.
What Are Stimulus Payments?
Stimulus checks, or Economic Impact Payments, are direct payments from the government during times of economic hardship. These payments, whether received by paper check or direct deposit, are designed to boost consumer spending and, in turn, stimulate the economy. The Stimulus payments were a key part of federal relief packages like the CARES Act (2020) and the American Rescue Plan (2021).
Who Qualifies for Stimulus Payments?
Not everyone qualifies for stimulus checks. Eligibility criteria typically include:
U.S. citizenship or permanent residency
A valid Social Security number
Not being claimed as a dependent on another taxpayer’s return
Income limits: Individuals with an adjusted gross income of up to $75,000 and married couples filing jointly with income up to $150,000 received the full payment.
Are Stimulus Payments Taxable?
The good news: stimulus checks are not taxable at the federal level. These payments were classified as economic relief, not income, so they do not need to be reported on your federal tax return. However, because Philadelphia has its own tax system, it is important to understand if these payments affect city taxes.
Stimulus Payments and the Philadelphia Wage Tax
Philadelphia’s Wage Tax applies to both residents and non-residents who work in the city. There is no need to worry—stimulus checks do not impact Philadelphia’s Wage Tax. Just like at the federal level, Philadelphia does not consider stimulus payments as income for wage tax purposes. Your local tax obligations will not change because of these payments.
Reporting Stimulus Payments: Recovery Rebate Credit
While stimulus payments are not taxable, they can affect your tax return in one key area: the Recovery Rebate Credit. If you did not receive the full stimulus amount you were eligible for or did not receive a payment at all, you can claim the difference on your federal tax return as a Recovery Rebate Credit. For example, if you had a child in 2021 or if there was an error in calculating your income in previous years, you may be entitled to additional stimulus funds.
This does not impact your Philadelphia taxes but is important to consider when filing your federal return.
Stimulus checks are not taxable at the federal or Philadelphia local level. However, they can still affect your overall tax situation, especially through the Recovery Rebate Credit. As tax laws evolve, it is important to stay informed, but rest assured, stimulus payments will not increase your Philadelphia tax bill.
NEED INFORMATION OR HELP CLAIMING THE 2021 STIMULUS:
Call (215) 454-6483 or visit www.cwfphilly.org.
April 15, 2025 is the deadline to claim the 2021 stimulus payment.
