President Biden has signed the $1.9 trillion American Rescue Plan Act of 2021 into law, aimed at assisting millions of Americans and business owners feeling the impact of COVID-19. Not only does the plan include the next round of stimulus payments that have been making headlines, but it also includes additional provisions to financially support a wide swath of the American public. The following points cover the provisions designed to impact most American families.
The new bill will provide direct stimulus payments of up to $1,400 per person. Individuals earning less than $75,000 and married couples earning less than $150,000, will receive the full amount per person. The payments will phase out earlier than past stimulus, completely cutting off individuals earning more than $80,000 and double that for married couples. Unlike previous rounds of stimulus payments, adult dependents—including college students, elderly parents, and disabled adult children—will be eligible for the payments, regardless of age.
Wondering where your economic impact payment is? Visit the IRS portal to check the status.
Once again, the bill extends unemployment assistance that was previously set to expire this month. Those who qualify will receive a $300 weekly boost, extended through September 6, 2021. The Act provides a tax break on unemployment benefits for households with an annual income of less than $150,000, making the first $10,200 worth of benefits tax-free.
Freelancers, gig workers, and independent contractors typically not eligible for unemployment will continue to receive benefits through the Pandemic Unemployment Assistance program.
Aid to states and municipalities
$350 billion is included in the bill to aid states, local governments, territories, and tribes. $10 billion will go to the Coronavirus Capital Projects Fund, which is intended for critical capital projects directly enabling work, education, and health monitoring, including remote options.
Tax credits for families and workers
Under the American Rescue Plan Act of 2021, the child tax credits have been increased to $3,600 for each child under 6 and $3,000 for each child under age 18, up from the current $2,000 per child under the age of 17. This credit will be fully refundable and can be claimed in the form of monthly payments (rather than waiting to claim it on your tax return), greatly benefiting lower-income parents in 2021.
The earned income tax credit for childless workers will be expanded, nearly tripling the maximum credit and extending eligibility to more people. The bill raises the income level to $9,820 (from $4,220) and changes the qualifying age to 19 (instead of 24), along with eliminating the maximum age of 65.
The bill gives $20 billion to state and local governments to help low-income households cover back rent, rent assistance, and utility bills. $10 billion will go to help struggling homeowners pay their mortgages, utilities, and property taxes. While the bill allocates more money for housing aid, many renters and landlords have yet to receive any aid from the previous stimulus.
An additional $10 billion will aid states and localities in assisting those at risk of experiencing homelessness and providing emergency housing vouchers for those who are homeless.
What else is included
No tax on canceled debt from student loans
- Any current debt cancellation programs for student loans, along with any potential widespread debt cancellation that may come from the Biden administration, will not trigger canceled debt income. Note that the bill does not include student loan forgiveness. Canceled debt income tax is canceled from January 1, 2021, through the end of 2025.
- The 15% increase in food stamp benefits will be extended through September. The act also provides $880 million in additional funding to WIC and continues the Pandemic-EBT.
Education and child care
- $130 billion will go to K-12 schools to assist in returning students to the classroom by updating and providing safety and health measures; $2.75 billion of that will go to private schools. $40 billion will go to colleges, and an additional $39 billion will be available to child care providers.
Health insurance subsidies and Medicaid
- Federal premium subsidies for Affordable Care Act policies will be more generous. The maximum income cap will be eliminated for two years. Individuals will pay no more than 8.5% of their income towards coverage and premiums for plans purchased on the health care exchanges.
Vaccines and COVID testing
- $14 billion will go to research, develop, distribute, administer vaccines
- $47.8 billion for testing, contact tracing, and mitigation
- $7.7 billion to assist in hiring 100,000 public health workers to support coronavirus response
- $50 billion for the Federal Emergency Management Agency
The bill provides $86 billion to failing union pension plans, which are projected to have insufficient funds to pay full retirement benefits within the next 20 years. This aid will allow certain pensions to apply for federal grant funding and help pay retirement benefits to workers.
What’s not included in the American Rescue Plan Act
- Minimum wage increase (the Act has no impact on minimum wage)
- Student loan forgiveness
- Suspension of required minimum distributions (RMDs) for 2021
If you have further questions about the details of the American Rescue Plan Act of 2021 or wish to consult with a tax professional before pursuing any of the relief options, please contact us to schedule a consultation. Looking for information on the American Rescue Plan Act’s provisions for small businesses? See our post covering small business loans, grants, and tax credits under the Act.