Let’s hope this is the last one, only because it would mean we’ve defeated the virus and the economy is back up and running. So let’s do this one more time: what does the American Rescue Plan have in store for you and your family?
New and Bigger Stimulus Checks
Just like the previous packages, this one comes with stimulus checks – the biggest one to date. If you reported less than $75,000 ($150,000 for those filing jointly) on your latest tax return (2019 or 2020, depending on whichever you filed last) you will receive $1,400 per individual, including children and dependent adults. So an eligible family of four will receive $5,600.
The one major difference for this round is the income eligibility cap. With the previous stimulus checks, you still received some money even if you made more than the basic eligibility limit – with a cap at $100,000 for single filers and $200,000 for joint. Above these amounts, you received nothing. For this 3rd round of stimulus checks, that maximum cap income is now $80,000 for single / $160,000 for joint. So that same person who made $85,000 and received some money with the previous stimulus packages will not receive any this time around.
The money will be deposited into the account the IRS has on file. The first payments could go out as early as this week-end.
Extension of Pandemic Unemployment Assistance (PUA) + $300 per week
Pandemic Unemployment Assistance, covering gig workers and the self-employed is extended through September 6th, along with the extra $300 / week from the federal government.
Extension of Mixed Earner Unemployment Compensation (MEUC)
The additional $100 per week granted to freelancers who also worked part-time and therefore haven’t been able to enroll in the Pandemic Unemployment Program has also been extended through September 6th.
Up to $10,200 of Unemployment Benefits are now tax-free
As we’ve previously stated, unemployment benefits (and the additional federal payments) are, under normal circumstances, considered taxable income by the IRS, which has left some folks out there with tax bills higher than expected in 2020. The American Rescue Plan addresses this issue by making the first $10,200 of unemployment benefits an individual has or will receive entirely tax-free as long as they earn less than $150,000. If both partners in a married couple received unemployment benefits, they can both exclude that amount (so up to $20,400) as long as their combined adjusted gross income remains under $150,000. In other words, the income eligibility cap for this tax break doesn’t change whether you’re filing single or jointly.
If you’ve already filed your 2020 taxes, and therefore already paid taxes on all of your unemployment money, you’ll most likely be able to file an amendment to get that amount refunded. You should reach out to your CPA to discuss your options.
An Upgraded Child Tax Credit
This is one of the biggest additions to the bill: it’s expanding the Child Tax Credit for the year 2021. Up until now, anyone making less than $200,000 ($400,000 for those married filing jointly) was able to deduct $2,000 per child from their tax liability. The American Rescue Plan is increasing that amount to $3,000 / $3,600 for kids under 6. And instead of making this amount a tax deduction that you can only claim when you file your 2021 taxes 10 months from now, the bill intends to turn half of that credit into a monthly cash payment starting this July, up to $300 per child.
Parents also no longer need to be employed to receive this new child tax credit (it used to be available only for people who earned at least $2,500 a year.)
Note that the income eligibility for this increase is different from that of the $2,000 base. To qualify for this additional $1,000 / $1,600, single filers must earn less than $75,000 ($150,000 for joint). Above that amount, the credit is reduced by $50 for every $1,000 of income.
For example if, as a single filer with a kid under 6, you earn $78,000, your total child tax credit for 2021 would be $3,600 – ($50 x 3) = $3,450. Therefore you should receive $288 every month from July to December.
According to the New York Times, more than 93 percent of children in American will receive benefits under this plan.
Lower cost and expanding access to health insurance
The American Rescue Plan updated many of the Affordable Care Act subsidies and eligibility requirements, making 7 million people newly eligible for free healthcare and lowering the costs of premiums for millions more, especially folks who are receiving unemployment benefits. It’s a bit complicated, as with anything healthcare-related, but we broke it all down for you here. The bottom line is if you’re looking to buy a health insurance plan, even if you looked before and thought it was too expensive, or if you don’t think you qualify for a free plan, you should visit healthcare.gov or contact a health insurance specialist to discuss your situation – because things have just changed.
Stay safe out there.