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Highlights of the American Rescue Plan of 2021

| March 17, 2021

Part 2 of our Budgeting series started last month, will continue next month.  

On March 11, 2021, President Biden signed the $1.9 trillion coronavirus relief package known as the American Rescue Plan (ARP) into law.  This is the third stimulus package to come out of Washington D.C. since the beginning of the COVID pandemic. 

The largest portion of the $1.9 trillion ARP is a new round of direct payments.  Eligible individuals (who earn up to $75,000) will receive $1,400.  Individuals earning more than $75,000 will received a reduced amount that is completely phased out at $80,000 of adjusted gross income.  The phaseout range for couples is $150,000 to $160,000.  Children and adult dependents of these individuals or couples will receive the equivalent amount.  Payments are expected to go out to most recipients by the end of March, and based on the language of the bill, we believe just like previous stimulus checks that these payments will be pre-payments of a tax credit and therefore do not appear to be taxable to recipients.

Another key provision is the extension of a $300 weekly federal unemployment supplement.  The previous supplement was set to expire on March 14, 2021 and is now extended through September 6, 2021.  These additional benefits will continue to be extended for self-employed individuals and independent contractors.  Tax relief on the first $10,200 of unemployment benefits was also added to for households earning $150,000 or less per year.

Tax relief was extended to student loans that have been discharged between December 31, 2020 to January 1,2026.  Any federal student loan that has been forgiven in this time period will be excluded from taxable income.

A 100% subsidy of COBRA premiums is now available through September for those who have been laid-off.  Additionally, the relief package includes tax credits for small businesses (those with less than 500 employees) to reimburse them for the cost of sick time.

The Child Tax Credits has been temporarily expanded as a part of the ARP.  The credit has increased from $2,000 to $3,000 for children 6-17, and those age 5 and under are eligible for $3,600 this year.  

While there are many other items in the 242-page bill, we want to highlight a few other provisions of the bill:

  • Over $65 billion for rental assistance, and an eviction moratorium extended through September.
  • $25 billion is made available to help restaurants and $22 billion in other aid to small businesses including funding for Economic Injury Disaster Loans, and Paycheck Protection Program.
  • $160 billion will be used for vaccine and testing programs.
  • $350 billion is set aside to aid state and local governments.
  • $130 billion for schools to re-open safely.

As with any relief package of this size, there will be details to flesh out.  We’ll continue to monitor the bill and its impact and keep you up to date.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.