After months of debate over the federal government’s third round of economic stimulus linked to COVID-19, President Biden signed the American Rescue Plan Act (ARP) in law on March 11.
As we summarize below, the ARP will provide federal dollars through a wide range of channels, including individual stimulus checks, funds for state and local governments, COVID tests and vaccines. 19, education, small business and anti-poverty programs, including three expanded tax credits.
American Rescue Plan Act: key provisions
$ 1,400 individual stimulation checks
Of the funds distributed by the ARP, the largest part, over $ 400 billion, is allocated directly to individuals. The ARP grants a direct payment of $ 1,400 for a single taxpayer, or $ 2,800 for a married couple filing jointly, plus $ 1,400 per dependent. People earning up to $ 75,000 would receive the full amount, as would married couples with incomes not exceeding $ 150,000. The bill includes a phase-out starting above these thresholds, with an absolute limit at $ 80,000 for individuals and $ 160,000 for married couples.
State, help from local communities
The second largest portion of funds goes to state and local governments. The ARP is allocating $ 360 billion for the tracing and administration of COVID-19 vaccines at the national and local levels. This assistance is intended to prevent further government layoffs and service cuts. Echoing one of the president’s major initiatives, the beneficiaries of these funds are responsible for “making the necessary investments in water, sewer or broadband infrastructure”, according to Title IX, subtitle M of the ARP.
For unemployed people and low-income families
With the federal unemployment benefit supplement set to expire on March 14, the signing of the ARP extended the current weekly unemployment assistance by $ 300 until September 6, 2021. Additionally, for tax year 2020, the first $ 10,200 of the taxpayer’s income will be tax free. For this to apply, the adjusted gross income of individuals and married couples cannot exceed $ 150,000. In addition, for married taxpayers, the non-taxable amount per person cannot be accumulated. This means that if spouse A had unemployment income of $ 15,000 and spouse B $ 5,000, spouse A will still be taxed on $ 4,800 of unemployment income. Varnum will update the information if and when the Internal Revenue Service issues additional guidance.
Amendments to the tax code
The AIP makes significant changes to the Child Tax Credit, the Working Income Tax Credit, and the Child and Dependents Tax Credit.
The ARP also increases the dollar limit and the applicable percentage for the child and dependent credit. For the 2021 tax year, the dollar limit is increased from $ 3,000 to $ 8,000 for one eligible child / dependent and from $ 6,000 to $ 16,000 for two eligible children / dependents. Working parents will be able to offset up to 50 percent of work-related childcare costs, up from 35 percent previously.
Extension of the Paycheque Protection Program (PPP); EIDL Advances and Restaurant Revitalization Fund
The ARP expands eligibility for PPP loans for small businesses to include other nonprofits and Internet publishing organizations. The ARP is also allocating an additional $ 15 billion in funds for EIDL advances. In addition, the ARP is establishing the Restaurant Revitalization Fund to provide grants to cover certain expenses of restaurants that have lost income due to the pandemic.
Reopening of schools and higher education
The ARP supports the safe reopening of schools, through investments in modernizing the ventilation system, reducing class sizes and personal protective equipment to help make public schools safer. It also allocates $ 40 billion in grants to higher education and requires institutions that receive the funds to spend at least half of it on emergency student financial aid grants. In addition, the ARP predicts that until 2025 any student loan canceled by the lender would not be subject to income tax.
Eric M. Nemeth, Mary Kay Shaver, and Yezi (Amy) Yan contributed to this article.