American Rescue Plan Act of 2021

The American Rescue Plan Act of 2021 (“Plan”) is an enormous piece of legislation designed to promote economic recovery and provide assistance to millions of Americans who have been impacted by the COVID-19 pandemic.  The Plan has a special focus on fighting poverty with several provisions that help low-income families, people who have lost their jobs and those who are at risk of food and/or housing insecurity. Signed into law on March 11, the Plan provides $1.9 trillion in relief.  Below is a summary of some provisions in the bill.

Healthcare funding: The Plan takes an aggressive approach to fighting the pandemic by allocating more funding for health systems to fight COVID-19 including vaccine distribution, testing, tracing, and personal protective equipment.  The Plan provides guidance on expanding access to underserved communities, which have been severely affected by the pandemic.

Economic Impact Payments: Economic relief in the form of $1,400 payments is being sent to individuals, $2,800 for married couples and $1,400 for each dependent.  To qualify for the full amount, taxpayers must meet income eligibility: $75,000 for singles and $150,000 for married couples filing joint returns. Relief payments begin to phase out above those income levels.[1]

Child Tax Credit:  Seen as an important vehicle to reduce child poverty, the Plan increases the Child Tax Credit from $2,000 to $3,600 for children under age 6 and $3,000 for children from age 6 to 18.  Credits will be paid to qualifying families in 2021 instead of making them wait until they file their 2021 taxes in 2022.  Credits will also result in a refund if there isn’t a full offset from taxes owed.

Unemployment Benefits:  The Rescue Plan extends the $300 in supplemental weekly unemployment benefits from expiring on March 31, 2021 through Labor Day, September 6, 2021.

$10,200 of unemployment benefits payments in 2020 are not taxable.  As an example, if a husband earned $9,000 and a wife earned $15,000 in unemployment benefits, $19,200 would not be included as taxable income.  This tax benefit applies if other earned income for the year is less than $150,000.  Check with your accountant if you have already filed your return prior to this legislation passing.

Additional funding for small businesses:  The bill infuses another $7.25 billion in funding for the Paycheck Protection Program, which provides loans to small businesses.  It also establishes a grant program for restaurants to help cover losses in revenue incurred during the pandemic.

Affordable Care Act:  A component of the Plan makes some adjustments to the Affordable Care Act (ACA) for the 2021 and 2022 tax years.  The ACA was created to charge premiums and offsetting subsidies based on income levels as a factor of the poverty level.  Premiums and subsidies for ACA plans have been changed by provisions in the Rescue plan that will benefit many who have Marketplace plans.  This is important for people who lost their jobs due to the pandemic and early retirees who do not yet qualify for Medicare.  For those over the maximum income levels, although subsidies may be eliminated, the premium is capped at a set percentage of income, which is more favorable than the original plan.[2]

Some other Plan provisions:

The Plan provides emergency funds to state, local and tribal governments that have received lower tax revenues because of the crisis but have incurred extra costs to set up emergency medical facilities, testing and vaccination sites and to provide relief to small businesses that need it.

$130 billion is to be allocated to help K-12 schools reopen safely and makes approximately $40 billion available for colleges and universities.

The Plan provides a Homeowner Assistance Fund and Rental Assistance to help the hardest hit Americans who have been faced with job loss and the inability to pay their mortgage or rent to stay in their homes.  It includes funding for those who are homeless or those at risk to find housing.

To find out how the American Rescue Plan affects you, you can find a wealth of information available on-line.  Some helpful websites include the following:

The White House, American Rescue Plan

US Department of the Treasury, Fact Sheet:  The American Rescue Plan Will Deliver Immediate Economic Relief to Families

[1] Department of the Treasury Fact Sheet, March 18, 2021.


~Karen Didde

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