On March 11, 2021 President Biden signed the American Rescue Plan Act of 2021 (The Act) and $1.9 trillion which followed closely the framework that the President had outlined during his campaign for President.
Highlights of the bill include:
Stimulus Payments – The Act includes a third round of stimulus payments that are credits against 2021 income taxes and can be up to $1,400 for every individual who has a social security number. The stimulus payments phase out at certain income levels and are zero for single individuals over $80,000, married joint over $160,000 and $120,000 for head of household.
Child Tax Credit – The Act provides significant changes to the credit for 2021 income taxes increasing the credit to $2,000 per eligible child with up to $1,400 of the credit being refundable.
Earned Income Tax Credit – The Act provides increase credit availability for 2021 income taxes especially for those filers without children.
Cancelation of Student Loans – The Act allows the exclusion from gross income the amount of qualified student loans that are cancelled or discharged between 2021 and 2025.
Unemployment Relief – The Act provides an extension of the enhanced $300 weekly unemployment relief available in prior pandemic relief bills. In addition, The Act provides that for 2020 the first $10,200 of unemployment benefits are exempt from tax for households with less than $150,000 of income.
Dependent Care Assistance – The Act provides an increase in the exclusion of employer-provided dependent care assistance from $5,000 to $10,500.
Employer tax credits for Paid Sick and Family Leave and Employee Retention are expanded and extended through the end of 2021.
EIDL and Restaurant Grants – The Act excludes these grants from the gross income of whom receives it, and the taxpayer is allowed 100% tax deduction for the expenses paid with those funds.
Please contact our team for guidance regarding these new provisions.