The latest economic relief package, known as The American Rescue Plan (ARPA) targets aid to both individuals and businesses. President Biden signed the $1.9 trillion bill into law on March 11, 2021. The cost of this economic bailout act is monumental. The goal is to help the United States recover from the devastating effects of the COVID-19 pandemic.
Understanding What’s in The American Rescue Plan Act of 2021: Highlights and Changes
- Extended Unemployment Benefits
The additional $300 per week has been extended through September 6, 2021.
The first $10,200 of unemployment earned in 2020 is now non-taxable if you are under the
$150,000 income threshold.
- Temporary Premium Tax Credit Changes
The American Rescue Plan Act broadens the eligibility of the premium tax credit in 2021 and 2022. In 2020, ARPA provides that taxpayers who receive excess advanced PTC would not be required to reconcile their income taxes subsequently. For 2021 and 2022, ARPA offers the removal of 400% above the FPL limit for premium tax credit eligibility. Also, individuals who are qualified to receive unemployment compensation are eligible for PTC.
- Stimulus Payment
The economic package includes direct payments of $1,400 to stimulate the economy, extending the unemployment benefits, maintaining moratoriums on evictions and foreclosures, and increasing Child Tax Credit while making it fully refundable. Individuals and couples with adjusted gross earnings of $75,000 or less and $150,000, respectively, will receive the total amount.
- Expanded Child Tax Credit
For every child from 6 to 17, the Child Tax Credit is increased to a maximum of $3,000 a year and $3,600 per child under the age of 6 for couples with earnings of $150,000 or less and single parents’ income of $112,500 or less. A family with a child under 6 would receive $300 per month and $250 per month for children aged 6 to 17. This credit is fully refundable. All eligible individuals will receive it regardless of their tax status.
- Student Loan Forgiveness
The American Rescue Plan does not include student loan discharge; however, it contains a provision that any student loan discharge that occurred between December 20, 2020, and January 1, 2026, will be tax-free. Typically, a student loan discharge counts as a taxable income.
- Credit for Paid Sick and Family Leave
With the recent modifications in The Families First Coronavirus Response Act (FFCRA), the Voluntary Paid Sick, and Family Leave Tax Credit Programs are now extended through September 30, 2021. The Act initiates a “reset” date for counting the paid sick leave on March 31, 2021, to allow them to claim for tax credits between April 1, 2021–September 30, 2021.
- Employee Retention Credit (ERTC)
The Act extends the credit until the end of 2021, providing up to $7,000 per employee per quarter to qualified employers–a credit limit of $28,000 per employee for this year. For 2021, the maximum amount of “qualified wages” is $10,000. The maximum amount of the credit limit is 70% of the “qualified wages.”
- Grants and Forgiven Loans
The American Rescue Plan provides for Paycheck Protection Program (PPP) loans where applications for forgiveness are expanded for those received after March 10, 2021. This Act also provides funding for the economic injury disaster loans (EIDL) grants which permit the applicants to apply for a maximum advance of $10,000. These grants need not be reimbursed. The Act also includes a grant program for all restaurants and food and beverage businesses affected by the pandemic. This allows eligible business owners to use up to $10 million per entity for many expenditures.
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