On March 11, President Joe Biden signed the American Rescue Plan Act of 2021. Also known as the COVID-19 Stimulus Package, this $1.9 trillion economic stimulus bill is designed in the ongoing recovery efforts of the year-old pandemic in the U.S.
The White House said that two-thirds of the legislation’s price tag goes toward tax cuts and direct payments to families earning less than $90,000 annually.
Some parts of the bill will have an immediate impact. There are other parts of the legislation you may not notice at all. Here is an overview of what’s contained in the American Rescue Plan.
One of the first benefits people will realize from the latest stimulus package is the $1,400 per person direct payment.
The American Rescue Plan provided the largest stimulus checks of the three bills passed since the pandemic. Each person making up to $75,000 annually either has or will receive a $1,400 payment. That amount doubles for joint tax filers earning up to a combined $150,000, while the maximum for head of household tax filers is $112,500. In addition, taxpayers received an additional $1,400 for each dependent child.
For example, a married couple with two dependent children received or will receive a payment for the IRS totaling $5,600.
The payments are slightly less for single taxpayers who earn between $75,000 and $80,000 and joint filers who earn between $150,000 and $160,000 (or between $112,500 and $120,000 for head of household filers). Those who make more than the $80,000, $160,000, or $120,000 thresholds will not receive a payment from the American Rescue Plan.
According to the Tax Foundation, about 89 percent of filers will get a payment from this latest stimulus bill.
The IRS notes that the payment will not impact your tax return either this year or next. “The payment is not income and taxpayers will not owe tax on it. The payment will not reduce a taxpayer's refund or increase the amount they owe when they file their 2020 tax return next year. A payment also will not affect income for purposes of determining eligibility for federal government assistance or benefit programs.”
For people who have difficulty finding work during the pandemic, the American Rescue Plan has several provisions related to unemployment benefits. The law:
- Extends the three unemployment insurance expansions created by last year’s CARES Act through September 6, 2021.
- Increases the total number of weeks of benefits available to people who still cannot return to work safely from 50 to 79.
- Provides 53 weeks of federal benefits after your state benefits end, up from 24 weeks.
- Exempts $10,200 of unemployment benefits received in 2020 from income taxes for individuals with incomes below $150,000. This means if you collected unemployment benefits in 2020, you can reduce your federal taxable income by up to $10,200. If you already filed your taxes without factoring in the unemployment exemption, check with the IRS on what to do.
[ Related read: What to do when you suddenly become unemployed ]
The stimulus plan increases the current Child Tax Credit, which the tax code provides to help with some of the cost of raising children. The previous credit was worth $2,000 per child for households with income up to $400,000, after which it started to phase out.
Now it will be $3,000 per child for those age 6 and over and $3,600 for children under 6. The new credit also makes 17-year-olds qualifying children for the entire year. The income phase-out for the additional credit amount over $2,000 per child starts at $75,000 for single filers and $150,000 for joint filers.
Taxpayers will also have the option to receive temporary, monthly advanced payments equal to 50 percent of the eligible 2021 child tax credit. These payments are scheduled to start around July 2021 and are based on income from the tax year 2020, if filed.
Additional taxpayer help contained in the bill includes:
- Emergency aid to help people cover back rent and assistance to help homeowners catch up with their mortgage payments and utility bills through the Homeowners Assistance Fund.
- A reduction or elimination of health insurance premiums for millions of lower- and middle-income families enrolled in health insurance marketplaces. The White House says that a family of four making $90,000 could see their monthly premium come down by $200 per month. The legislation also subsidizes premiums for continuation health coverage (COBRA).
- A 15-percent increase in SNAP benefits through September 2021 and help for the restaurant industry.
- An increase of the Earned Income Tax Credit for 17 million workers by as much as $1,000. According to the White House, the top occupations that will benefit from this extra credit are cashiers, food preparers and servers, and home health aides.
- Additional child care assistance, including a refundable tax credit for child care spending for children under 13. Families can receive a total of up to $4,000 for one child or $8,000 for two or more children.
- An additional $1 billion for states to cover the additional cash assistance that Temporary Assistance to Needy Families (TANF) recipients needed as a result of the crisis.
The legislation also earmarks $290 billion toward a national COVID-19 vaccination program and assistance to schools to help them safely reopen.
There is also money allocated to small businesses, emergency funding for state and local governments, and assistance to public transit agencies.
Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.
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