With tax issues very much at the forefront of Americans’ minds this April, one area where many are a little confused is with Qualified Disaster Distributions and how these differ from Stimulus Checks. With that in mind, in this guide, we’ll outline all you need to know about the main difference between Qualified Disaster Distributions and Stimulus Checks.
What are Qualified Disaster Distributions?
First off, what exactly are Qualified Disaster Distributions? Well, these are any distributions paid out of a 401(k) plan on or after the first day of the occurrence of a ‘qualified disaster’ and before June 25, 2021.
The coronavirus pandemic was officially labeled as a ‘qualified disaster’ in all 50 states of the USA and in the District of Columbia too. Therefore people could make money out of their retirement plans to help them to cope with the economic hardships of the pandemic, although that amount could not exceed 100,000 dollars. The main thing to keep in mind here when it comes to filing taxes is that Qualified Disaster Distributions are treated as taxable income.
How Is Stimulus Check Different From Qualified Disaster Distribution?
The stimulus checks that were given out by the US government were different, as these were advance of refundable tax credits. therefore it was not if you have already claimed yours, they won’t affect the amount of tax you have to pay this April, nor will they increase or lower your tax refund.
Only one of the stimulus checks was paid out in 2021 anyway, as the first stimulus check of $1,200 came in April 2020, where the second stimulus check of $600 came in December 2020 and then the third one of $1,400 was distributed in March 2021.
