After months of congressional back and forth, President Joe Biden signed the $1.9 trillion American Rescue Plan Act of 2021 into law on March 11. The new legislation builds on some of the provisions included in last year’s CARES Act and the Consolidated Appropriations Act, 2021, which passed in December.
The 600-page bill includes funding for public health initiatives to help deal with COVID-19 as well as preparations for reopening schools, but the biggest focus has been on the measures that may impact your finances directly. Here are some of the top things to know about President Biden’s COVID-19 relief package.
A THIRD ROUND OF STIMULUS CHECKS
Many Americans will receive a third round of direct payments, this time $1,400-per-person plus an additional $1,400 for each dependent. Individuals making up to $75,000 per year and couples earning up to $150,000 per year (for married, filing jointly) will be eligible for the full amount.
Beyond that, the payment will phase out completely for individuals at $80,000, and for couples at $160,000. For those who file as heads of household, the phaseout will begin at $112,500 and end at $120,000. These payments have faster phaseouts than in previous rounds. In addition, the full amount of the payout, including for dependents, will phase out at the higher end of the income.
Also keep in mind that eligibility and the amounts you receive will be based on either your 2019 or 2020 return, depending on whether your 2020 return is processed before your stimulus payment. This calculator can help you estimate how much you and your family might receive.
EXTENDED UNEMPLOYMENT BENEFITS
The $300 federal supplement to state unemployment benefits that was extended by the Consolidated Appropriations Act were due to end on March 14. This latest package will keep the supplemental federal pandemic unemployment benefits at $300 per week through September 6. In addition, households making less than $150,000 will not be taxed on the first $10,200 in unemployment benefits.
HIGHER CHILD TAX CREDITS
The legislation temporarily raises the child tax credit for tax year 2021 from $2,000 to $3,000 for taxpayers with children ages 6 to 17. For children under 6, the amount jumps to $3,600. If you have dependents who are not qualifying children, you may be able to get a $500 tax credit.
To qualify for the full additional amount, you must make less than $75,000 for single filers and $150,000 for married joint filers. (Families who don’t qualify for the increased credit can still qualify for the $2,000 credit if their incomes fall below $200,000 for single filers and $400,000 for married joint filers.)
The plan also makes the tax credit fully refundable in 2021. If your family is eligible for the credit, you might also receive part of the credit via direct payments of up to $300 per child, per month, from July through the end of the year. Any remaining tax credit would be received via your 2021 tax return.
MORE FUNDS FOR SMALL BUSINESS LOANS
The legislation earmarks $175 million for a "community navigator" program to provide outreach, education and technical assistance to eligible small businesses to help them participate in COVID-19 relief programs.
This bill also allocates another $7.25 billion for the Paycheck Protection Program (PPP), which provides forgivable loans to qualified businesses through the Small Business Administration. However, the current application deadline wasn’t extended and remains March 31.
Another $15 billion of funding will go toward Economic Injury Disaster Loan (EIDL) advance grants. Businesses in low-income communities that have been most affected by the pandemic will be eligible for up to $10,000 each. The SBA must provide $5,000 grants to each eligible company, while funds last.
The program will give out funds to businesses in this order:
Those that didn't get the full amount they applied for initially.
Those that have had losses of 50 percent and have fewer than 10 employees.
Those that have losses of between 30 percent and 50 percent and have fewer than 10 employees.
OTHER TAX PROVISIONS
Here are a few things to know about other important tax items addressed in the American Rescue Plan Act.
Employee retention credit. The ERC has been extended until year-end. Under the new bill, businesses can claim the credit up to $7,000 per employee per quarter during the last half of the year.
Child and dependent care credit. You could get a credit of up to 50 percent of your eligible expenses, to a max of $4,000 for one qualifying dependent and up to $8,000 for two or more. The percentage of the credit you can take starts to phase out once you earn more than $125,000. The credit applies to children up to 13 or qualifying adults that required care.
Student loans. Borrowers whose student loans were forgiven will no longer be responsible for paying taxes on the canceled amount on loans discharged after December 31, 2020, and before January 1, 2026.
This publication is not intended as legal or tax advice. Consult with a tax professional for tax advice that is specific to your situation.