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Will You Receive Stimulus Money

Will you receive additional stimulus money? And Other Key Provisions of the American Rescue Plan Act
Last week, the American Rescue Plan made it to President Joe Biden’s desk, where he signed it into law. The bill spent weeks in both chambers of Congress being debated and adjusted so it could move forward. Those debates resulted in many hot topic items (like $15 minimum wage) being taken out of the bill. But, now that it has been signed into law, we wanted to share some of the key highlights of the bill and how they could impact Americans across the country.  

$1,400 Direct Payments
A third round of stimulus payments is one of the main provisions of this legislation. Individuals earning less than $75,000, and married households earning less than $150,000 (Adjusted Gross Income) will be eligible for these payments, along with their eligible dependents. This means a family of 5 (husband, wife, and 3 children), will receive $7,000. These payments have begun going out and are expected to continue to be direct deposited into Americans’ bank accounts.  

A Portion of Unemployment Insurance May Be Excludable from Income
Until now, it has been expected that all unemployment benefits received in 2020 would be fully taxable. However, the American Rescue Plan Act (ARPA) changed that. For 2020 only, up to $10,200 (or $20,400 for married people filing their taxes jointly) may be excluded from taxable income. Adjusted gross income must be less than $75,000 for individual filers, and $150,000 for joint filers to take advantage of this provision.  

For those that have already filed their taxes and received unemployment benefits in 2020 and paid taxes on those benefits, an amended tax return will be necessary. For those that have not yet filed their taxes, make sure your tax professional knows about this critical change. 

Extension of Unemployment Benefits
For people currently receiving unemployment benefits, ARPA extends those benefits past the current March 14 expiration date to September 6, 2021. Recipients of unemployment can expect to receive $300 per week until the new expiration date, in addition to any state benefits for which an individual may qualify.  

Expansion of Child Tax Credit
The Act changes several key provisions of the Child Tax Credit for 2021. Below is a summary of some of those key changes, but please note that these changes are only applicable for 2021. 

  • Which children qualify has been changed to include children up to 17 years old; it was previously only for children up to 16 years old. 
  • The child tax credit will be a fully refundable tax credit for 2021.
  • The amount of the child tax credit is being increased from $2,000 to $3,000 for 2021 for all taxpayers under a certain AGI limit. 
  • For all children under 6 years old, the child tax credit will be $3,600. 
  • For children 6-17, the credit will be $3,000.
     
     

Modification of Student Loan Forgiveness
The Act excludes certain discharges of student loan debt occurring in the years 2021 through 2025 from gross income.

Extension of Refundable Payroll Tax Credits for Employers and Self-Employed Individuals
The Act extends the refundable payroll tax credits for paid sick time, and paid family leave through September 2021.

Other changes you will want to discuss with your tax professional or financial advisor: 

  • Expansion of Child and Dependent Care Credit for 2021
  • Changes to the Earned Income Tax Credit for 2021
  • Increase in Exclusion for Employer Provided Dependent Care Assistance for 2021
  • Changes to the Affordable Care Act (ACA) Premium Assistance Payments/Subsidies

 If you have questions or would like to discuss how these changes impact you, specifically, please feel free to reach out to our office: 919-851-5512 (Cary office) or 910-692-9014 (Southern Pines office). 

 

 

This information is intended to be educational.  Hicks & Associates Wealth Management does not provide tax or legal advice. You should consult with a qualified tax, legal or financial professional before making any decisions.

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