COVID Relief Part 3 - American Rescue Plan Act
Almost a year after the first stimulus package was passed, last week President Biden signed the American Rescue Plan Act into law. This $1.9 trillion act represents about 27% of America’s gross domestic product (GDP) and brings the total pandemic economic relief to $6 trillion. The money will be passed along to individuals, businesses, and state and local governments. Here is more detail on a few of the big-ticket items:
Stimulus Checks ($410 billion): This is the third round of direct payments to individuals over the past year and is the most targeted thus far. The payment amount is up to $1,400 per qualifying individual and dependent. The income limitations were kept the same at $75,000 for individuals and $150,000 married filing jointly. However, the most significant changes are the income phase-out levels, which were lowered to $80,000 (from $87,000) for individuals and $160,000 (from $174,000) for married filing jointly.
The definition of dependents to receive stimulus payment has been expanded to include 17-year-olds and adult dependents (anyone 18 or older). This group includes about 13.5 million college students, older adults, and children with certain disabilities.
Payments have already started and are expected to continue for the next two to three weeks. If you would like to check the status, date, or eligibility of your stimulus payment, visit https://www.irs.gov/coronavirus/get-my-payment and click “Get my payment.” The official IRS website will ask for your Social Security number, date of birth, and home address. Just like the previous bill, this amount is not taxable.
Unemployment Benefits ($289 billion): The unemployment benefits from the CARES act have been extended. $300 weekly unemployment payments are extended through September 6th, 2021. The American Rescue Plan provides 53 weeks of federal unemployment benefits after state benefits end. Very important: it was also announced that $10,200 of unemployment benefits received in 2020 are now exempt from income taxes. This is retroactive to the 2020 tax year.
Expanded Child Tax Credit ($135 billion): The Child Tax Credit now allows households with children to claim up to $3,600 (under age 6) and $3,000 (over age 6) per child. This is up from $2,000 and is a temporary change for only 2021. Another provision would allow some families to receive this amount by monthly direct payments rather than in a lump sum when taxes are filed. This monthly payment is projected to be rolled out in July, but it may be hit with some delays as this is a monumental task for the IRS to figure out the logistics so quickly.
Health Care Coverage ($81 billion): The Affordable Care Act’s (ACA) premium tax credits have been increased for 2021 and 2022. The annual income cap limit was eliminated, making more people eligible for a reduction in their premium payment. Another provision is the temporary subsidization of COBRA coverage. COBRA is now being 100% covered for newly unemployed Americans, meaning they won’t have to pay to keep health care coverage after losing their jobs. This provision is through the end of September.
Nearly every American will at least receive some type of direct payment or tax benefit through this plan. Some lawmakers are beginning to have discussions regarding converting some of the temporary changes to be permanent for the future. Please keep in mind this is just an overview of the plan, and accountants should be consulted for specific tax numbers or advice.
As always, for strategies or questions, feel free to reach out to me.
Evan Werckenthien, CFP
600 E. Carmel Drive Suite 130
Carmel IN 46032
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