The third round of stimulus since the start of the pandemic was signed into law on Thursday, March 11 by President Biden. The $1.9 trillion relief bill, officially known as the American Rescue Plan Act of 2021, will again provide stimulus checks, along with some other familiar features as the two previous stimulus packages.
Here is a summary of the main provisions contained in the bill.
2021 Recovery Rebates
The Recovery Rebates, or stimulus checks, are the centerpiece of the bill, which account for $410 billion of the $1.9 trillion. The amount of the check is calculated by multiplying $1,400 by the number of qualifying individuals. This includes the taxpayer themselves along with any dependents. One key difference between the 2021 Recovery Rebates and the prior stimulus packages is that this relief bill allows you to count dependents, not just children under 17.
Like the prior two relief bills, there are income-based phaseouts. However, the stimulus checks under the American Rescue Plan have a much narrower phaseout (shown below).
Single and Married Filing Separate: $75,000 - $80,000
Head of Household: $112,500 - $120,000
Married Filling Joint: $150,000 - $160,000
The 2021 Recovery Rebate will be paid now based on the prior year’s Adjusted Gross Income (AGI); however, it is still considered a 2021 credit. The tax return used to determine eligibility will be based on the most recent tax return filed (2019 or 2020). If you failed to qualify for the recovery rebate based on 2019’s or 2020’s AGI, you could still qualify if your income in 2021 has dropped below the phaseouts. Also, if you qualified based on 2019’s or 2020’s AGI, but your income increased above the phaseouts in 2021, the Recovery Rebate will not be clawed back when you file your 2021 tax return.
A dizzying array of scenarios is possible. If you have questions about whether you will qualify, please give your planning team at Syverson Strege a call.
Child Tax Credit Enhanced for 2021
The Child Tax Credit was temporarily increased for 2021. Since 2018, the Child Tax Credit is $2,000 per child with phaseouts beginning at $200,000 for individuals and $400,000 for married couples filing jointly. Under the American Rescue Plan, the credit was increased by $1,000 ($3,000 in total) for dependents under 18. For children under 6, the credit was increased by $1,600 ($3,600 in total). The phaseouts for the additional credits are slightly different. Here are the applicable thresholds:
Joint Filers: $150,000
Head of Household: $112,500
All other filers: $75,000
Other Notable Provisions
- Enhancements to the Premium Assistance Tax Credit health insurance policies purchased through state-run health insurance exchanges for 2021 and 2022
- Student debt forgiveness from 2021 through 2025 will be income tax-free
- Enhancements to unemployment compensation
What is not included?
- Required Minimum Distributions (RMDs) will not be suspended in 2021 like they were in 2020.
- No further extension of PPP loans for small businesses (i.e., no PPP3).
- No minimum wage increases to $15/hour (was removed from the Senate version during reconciliation).
If you have any questions about the American Rescue Plan Act of 2021, please contact your planning team at Syverson Strege.
