On March 11, President Biden signed the $1.9 trillion American Rescue Plan Act of 2021, providing additional pandemic-related relief for taxpayers and small businesses. The law includes additional PPP funds, stimulus checks and child tax credits, extended unemployment benefits, and relief for restaurants, as well as other provisions.
Some measures will be immediate, like providing stimulus checks and extended unemployment, while the details of others are still being sorted out, like restaurant relief. We are here to help and will update you as more information becomes available. As always, feel free to contact your CPA for specific questions.
Here are key points of the Act:
- Stimulus checks – The American Rescue Plan includes $1,400 in stimulus checks for individuals with adjusted gross income (AGI) of less than $75,000 in the most recent tax year for which they have filed a return. This means 2020 returns for those who have already filed and 2019 returns for those who have not. Married couples who filed a joint return with AGI of $150,000 or less will receive $2,800. The amount of the stimulus decreases for those with AGIs over the thresholds, and the relief payment totally disappears when AGI reaches $80,000 for individuals and $160,000 for married filing jointly. If the IRS already has a taxpayer’s bank account information, payment will come in the form of direct deposit. Payments officially began on March 17.
The stimulus also includes a $1,400 payment for each dependent claimed on the most recent return, whether the dependent is a child, senior parent, or other individual. While previous stimulus packages provided payment only for children under a certain age, there is no age limit for the dependent payment in the third stimulus act.
- Extended unemployment and COBRA subsidy – The latest stimulus package increases the total number of weeks an individual can receive unemployment from 50 to 79 and extends Pandemic Unemployment Assistance payments of $300 per week through September 6.
The Act also provides a new tax benefit to those who have received unemployment. The first $10,200 in unemployment benefits in 2020 and 2021 will be tax-free for taxpayers with AGIs of less than $150,000. There is no phase-out, so taxpayers with AGIs of $150,000 or more will pay tax on all unemployment payments.
In addition, the Act provides a 100% subsidy of COBRA health insurance payments, including for covered relatives. The tax-free relief applies to COBRA premium payments from April 1 through September 30.
- Increase in child tax credit – The Act increases the child tax credit to a maximum of $3,000 per year for each child aged 6 to 17 and $3,600 for each child under age 6 for couples with an AGI of $150,000 or less and single parents with AGIs of $112,500 or less. The credit will come in the form of advanced payment and be sent by direct deposit. The payments phase out by $50 for every $1,000 over the AGI thresholds.
- Restaurant revitalization fund – Restaurants are the beneficiaries of a new $28.6 billion grant program established by the Act. Also eligible for grants are bars, food carts, coffee houses, and any other entity whose primary purpose is to serve food or drink to the public. Restaurants with 20 locations or more, that are publicly traded or owned by a state or local government, or that have either applied for or received a shuttered operator grant do not qualify. Grants will be based on losses, which are calculated as the difference between 2019 and 2020 receipts, minus any PPP money received.
- Paycheck Protection Program (PPP) updates – The Act adds $7.25 billion in funding for PPP loans and includes less stringent eligibility standards for nonprofits as well as qualifies internet-only publishing organizations for loans. Despite the updates and additional funding, the deadline to apply for a PPP loan remains March 31.
The Act has many more provisions, including additional rental and emergency housing assistance, aid to schools and childcare facilities, and funding for COVID-19 vaccines and testing. If you have questions about any part of the American Rescue Plan, contact us. We can help with those as well as assist in filing your tax returns and preparing financial calculations for relief programs.