With President Biden’s signature of the American Rescue Plan Act of 2021 this week, Congress has now passed three bills within the past 12 months aimed at coronavirus relief and economic stimulus. The total of the three relief plans’ spending is an estimated $4.8 trillion.
In March 2020, in response to the COVID-19 crisis, Congress passed legislation known as the CARES Act to aid individuals, small businesses, and establish a lending fund for industries, cities, and states (including the airline industry, state and local emergency aid, and hospitals).
In December 2020, the bill known as the Consolidated Appropriations Act, 2021, passed with familiar provisions as its CARES Act stimulus relief predecessor. Within the bill was billions of dollars allocated for small businesses (via the Paycheck Protection Program (PPP) loans), billions for schools and universities, agriculture, transportation, childcare centers, as well as the purchase and distribution of the COVID-19 vaccines.
The American Rescue Plan allocates dollars to various areas, including (but not limited to) an extension of federal unemployment benefits through early September and directing money to state and local governments. Funds are also allocated to educational agencies to bolster the Paycheck Protection Program (PPP) and public health organizations to aid in distributing the COVID-19 vaccine.
The plan also includes a provision to increase the child tax credit. This change would increase the current $2,000 per child credit to $3,000 per child ages 6-17 and $3,600 per child under 6 years old. To provide the tax credits to families more quickly, there is speculation the IRS may begin sending 50% of the credit to taxpayers in monthly installments from July-December 2021 (with the remaining 50% claimed by taxpayers upon the filing of their 2021 tax return in early 2022).
And, once again, the legislation includes another rebate or “stimulus” payment to taxpayers and dependents (see below for details).
Who receives Stimulus “Checks,” and how much will they receive?
These payments, classified as “rebates,” will once again be sent to individuals and eligible dependents.
Under the bill, taxpayers and eligible dependents will receive $1,400 each. While previous relief bills required dependents to be children under age 17, no such requirement is part of the American Rescue Plan, thereby allowing any dependent claimed by a taxpayer(s) for federal tax purposes to be eligible for the $1,400 payment. This change would, for example, make college-age children or an elderly parent claimed as a dependent eligible for this rebate.
Who does NOT receive a Stimulus “Check?”
Taxpayers earning above certain income thresholds will once again be ineligible for rebate payments. The IRS will utilize the most recent data on file, whether it be a taxpayer’s 2019 tax return or 2020 tax return. Just as with the March and December 2020 rebate payments, individual taxpayers earning in excess of $75,000, head-of-household filers exceeding $112,500, and couples earning over $150,000 a year will see their payments reduced. However, the American Rescue Plan uses a phase-out schedule that more quickly lowers and ultimately eliminates rebate payments versus the past two relief bills.
This elimination process results in the rebates phasing-out completely for individuals earning $80,000, those filing as Head of Household at $120,000, and joint taxpayers at $160,000.
Below is a table comparing the three relief bills and rebate payment parameters for each:
This content does not constitute legal, tax, accounting, financial, or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial, or investment professionals based on your specific circumstances. We do not make any warranties as to the accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.