On March 11, 2021, President Joe Biden signed into law the American Rescue Plan Act of 2021, also known as the COVID-19 Stimulus Package or H.R.1319. This $1.9 trillion economic stimulus bill, the most significant progressive piece of legislation in history, aids in people’s economic and health recovery in the United States.
There are many parts to the American Rescue Plan, so we will detail it in two parts. Part One will explain the personal impact of the Plan, and Part Two will provide context for the business and economic recovery portion of the Plan.
Economic Impact Payments
The third round of economic impact payments made good on Joe Biden’s promise to get $2,000 in stimulus checks to eligible Americans.
In December 2020, qualifying taxpayers received $600 stimulus checks as a down payment. To meet the goal of granting $2,000 stimulus checks, economic impact payments were sent of up to $1,400 to individuals or $2,800 per married couple. Each dependent will also receive $1,400 stimulus checks, including qualifying dependent adults.
Taxpayers are eligible up to an adjusted gross income on their completed 2019 or 2020 tax returns of:
$75,000 for single people or married filing separately
$112,500 for heads of household
$150,000 for married couples filing jointly and surviving spouses
Child Tax Credit Expansion
The American Rescue Plan also set out to eliminate the childhood poverty rate by 50%. To do this, the law revises the child tax credit in several ways:
Credit amount increased: The child tax credit for children under six years old increased from $2,000 to $3,600 and $3,000 for children under 18 years old.
Expansion of scope: Previously, the child tax credit only covered children aged 16 or younger. They have expanded the credit to include children up to age 17.
Advance payments for the 2022 tax year: Rather than make struggling families wait until filing their 2021 taxes in 2022, the IRS is sending eligible individuals the 2021 child tax credit in periodic payments beginning on July 1 through December 31, 2021.
Fully refundable: Low-income households can get the full credit benefit, as they have made the American Rescue Plan fully refundable.
Credit expansion to U.S. territories: Low-income families in Puerto Rico and other U.S. territories can now take advantage of the child tax credit.
The American Rescue Plan helps those on unemployment benefits in two ways.
First, it extends unemployment benefits and eligibility until September 6, 2020. Each eligible beneficiary will also receive a $300 per week supplement on top of their unemployment benefits.
Second, it waives federal taxes for unemployment benefits received in 2020 on the first $10,200 for lower- and middle-income taxpayers.
Earned Income Tax Credit
Frontline workers have been hit especially hard during the pandemic. For 17 million workers, the earned income tax credit has been expanded, increasing the credit amount up to $1,000.
Child Care Assistance
Families are now eligible for a refundable tax credit for as much as half of child care expenses for child dependents up to 13 years old. The tax credit amounts to $4,000 for one child and $8,000 for two or more children.
Health Insurance Premium Assistance
Low- and middle-income families enrolled in health insurance marketplaces are eligible for a reduction in their monthly premiums based on their income. Those on COBRA may also receive a subsidized premium for continuing their health coverage.
How Can You Benefit from the American Rescue Plan?
Still not sure if or how the American Rescue Plan of 2021 helps you? At JStevens Accounting in Annapolis, Maryland, we can help you determine where you fit into the American Rescue Plan. We are bookkeepers, accountants, and tax preparers. But, we’re also parents and family members working to help others ensure they get everything they’re entitled to from the American Rescue Plan. Contact us today to find out how we can help you navigate all the changes and tax implications.