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Up to 23 million California residents are on track to receive tax refunds of up to $1,050, thanks to one-time stimulus payments the Golden State began rolling out on Friday.
The payments, which will total $9.5 billion, mark the largest such program in the state’s history.
The initiative, dubbed the Middle class tax refundcomes as nationwide inflation has reached historic highs. California had a Record surplus of $97.5 billion as it finalized its budget, including payments earlier this year.
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“We know it’s expensive right now, and California is putting money back in your pocket to help out,” said California Governor Gavin Newsom, a Democrat. said in a press release.
“We’re sending out refunds worth over a thousand dollars to help families pay for everything from groceries to gas,” he said.
Who is entitled to a refund?
To be eligible to receive a payment, you must meet certain requirements.
You must have been a resident of California for six months or more during the 2020 tax year and currently be a resident of the state.
California Governor Gavin Newsom and Mayor Libby Schaff of Oakland, California during a press conference on May 10, 2021 in Oakland.
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You must have filed a 2020 tax return by October 15, 2021 and have an adjusted gross income within the required thresholds.
Also, you must not have been claimed as a dependent by someone else.
How much money will I receive?
Payouts for eligible couples filing jointly can range from $400 to $1,050.
Eligible individuals can receive between $200 and $700.
The amount of the checks depends on two factors: income and the number of dependents.
The most generous amount — $1,050 — goes to married couples filing jointly with an income of $150,000 or less and a dependent. A couple in this income category will receive $700 if they have no dependents.
Individuals with incomes of $75,000 or less can receive $700 if they have a dependent and $350 if they do not.
Payments are being phased out for those with up to $500,000 in income, for married couples, and $250,000, for individuals. California residents whose income exceeds these thresholds will not receive a stimulus payment.
Income is based on your California adjusted gross income, which can be found on line 17 of 2020 Form 540 or line 16 of 2020 Form 540 2EZ.
An online tool can help you estimate your payment amount.
When will the checks leave?
Payments will be issued between this month and January.
Direct deposits will be sent to residents who electronically filed their 2020 state returns and received a refund from the state via direct deposit. About 90% of direct deposits are expected to be issued in October, starting Friday.
Further payments will be issued on mailed debit cards from the end of the month.
A total of 18 million payments will be sent. The checks are expected to benefit up to 23 million Californians.
To find out when you can receive your money, see the online payment schedule.
Will the payments cause inflation?
California isn’t the only state to roll out one-time rebates amid budget surpluses. Florida, for example, sends $450 to certain families with children.
A big question raised by the checks sent by California and other states is whether they will exacerbate inflation.
While California “on the net will come out on top,” it could be hurt by other states exporting inflation with their refunds, said Jason Furman, an economics professor at Harvard University. tweeted recently.
“California are going to lag behind any ‘inflation relief payments’ made by Florida and other states,” he wrote.
States are sitting on record surpluses and many individuals are struggling under the weight of extremely high inflation.
Vice President of State Projects at the Tax Foundation
While states have rolled out one-time payments year-round, there was a slight increase closer to Election Day, noted Jared Walczak, vice president of state projects at the Tax Foundation.
“States are sitting on record surpluses and many individuals are struggling under the weight of extremely high inflation,” Walczak said.
This prompts policy makers to bring the two together and want to write checks.
“Unfortunately, this only fuels inflation by pumping more money into an overheated economy,” Walczak said.
Tax cuts would be a better alternative for additional long-term income, he said. If, instead, states are considering one-time money, it would be better spent on one-time needs, such as pension funds or bad weather, he said.