What You Need to Know
The “American Rescue Plan Act of 2021” has now been signed into law by President Biden on March 11, 2021. This $1.9 trillion coronavirus relief package is best known for the new round of stimulus checks which are expected to start going out this weekend. Let’s take a look at some of the details:
The Third Round of Stimulus Payments
- $1,400 per person plus $1,400 per dependent, with income limitations.
- Income Limitations of $75,000 for single tax filers, $150,000 for joint tax filers and $112,500 for Head of Household filers.
- This is phased out with incomes between $75,000 – $80,000 for single filers and $150,000 – $160,000 for joint filers and $112,500 to $120,000 for Head of Household filers.
Extended Unemployment Support
- Federal unemployment checks of $300 per week are extended to September 6, 2021.
- The first $10,200 of 2020 unemployment benefits are not taxed for households making less than $150,000.
Expanded Child Tax Credits for 2021
- Increased credit amount to $3,600 per qualifying child up through age 6 and $3,000 per qualifying child age 7-17. (This is an increase from the current amount of $2,000 and the current age cap of 16.)
- Income Limitations of $75,000 for single tax filers, $150,000 for joint tax filers and $112,500 for Head of Household filers and phased out above these limits.
- The phaseout is $50 for every $1,000 of income.
- NEW: This Credit is now refundable for 2021.
- NEW: Advance Payments will be made. The expectation is that periodic payments will be made starting Summer 2021.
- According to the Tax Policy Center, more than 90% of families will get some benefit from this expanded Child Tax Credit.
- As this applies to 2021 tax year, it will get reconciled on 2021 tax returns which will get filed a year from now.
Expanded Earned Income Tax Credit
- This was expanded in many ways including special rules that were added to cover individuals with no children, and:
- The minimum age to qualify was decreased, and the maximum age was eliminated.
Expanded Child and Dependent Care Tax Credit for 2021
- For those that pay expenses for the care of a qualifying individual so that you can work or actively look for work, the credit is expanded from $1,050 to $4,000 for one child and from $2,100 to $8,000 for two or more children.
- NEW: This Credit is now refundable for 2021.
Additionally, the new law provides assistance in the distribution of COVID-19 vaccines, aid to state and local governments with a portion for infrastructure projects, assistance to schools with funds for COVID-19 precautions and student loan forgiveness is now tax-free for forgiveness from 2021 and 2025. There are so many other provisions as well and we will share planning opportunities with you. Please contact us if you have any questions.
