On Friday, March 5, 2021, the Senate voted 50-49 in favor of an amended American Rescue Plan (President Biden’s $1.9 trillion tax and spending package). This bill was sent back to the House for their vote. Today, March 10, 2021, the House passed the American Rescue Plan and President Biden is expected to sign it into law.
Since March 2020, two bills have directly impacted most taxpayers — the CARES Act and Consolidated Appropriations Act. Now, the American Rescue Plan has passed, the first for President Joe Biden’s term, almost a year to the date that the world shut down. Each of the prior COVID-relief bills has focused on getting cash in taxpayers’ hands, and this bill is no different.
Here's a closer look at some of the big-ticket provisions:
- Per person payment of up to $1,400 (including dependents). For single taxpayers with AGI up to $75,000 (completely phased out for single taxpayers with an AGI over $80,000). For married taxpayers who file jointly with AGI up to $150,000 (completely phased out for MFJ taxpayers with AGI over $160,000).
- Provides $300 a week in federal unemployment benefits through September 6 and makes the first $10,200 in unemployment benefits tax-free in 2020 for households making less than $150,000 per year. This is a change from the $400 a week included in the House original version of the bill.
- Allows the child tax credit to be fully refundable for 2021. The bill increases the amount of the credit to $3,000 per child ($3,600 for children under 6). This credit is subject to phaseouts. The IRS must estimate the taxpayer’s child tax credit and pay a monthly advance 1/12th of the annual estimated amount. Payments will run from July to December 2021.
- Increase to Earned Income Tax Credit and the Child and Dependent Care Credit.
- Allows for extension of the Employee Retention Credit through the end of 2021.
- Extension of sick and family leave credit to September 30, 2021.
- $350 billion for state, local, and tribal governments to deal with the economic hardship of the pandemic
- $130 billion for schools, including funding for protective equipment and ventilation
- $40 billion for public colleges, half of which must be passed on to students through financial aid
- $50 billion for COVID testing and contact tracing
- $25 billion for restaurants and bars
- $350 billion for state and local governments
- $90 billion towards transportation and infrastructure
- $30 billion for emergency rental assistance
HORNE will continue to keep you updated. If you have any questions, contact your tax advisor.