The American Rescue Plan Act (ARP) of 2021 that passed Congress in March and was signed into law by President Biden targets $1.9 trillion in government aid to the U.S. economy.
Here’s a summary of some of the key provisions.
Help for individuals
A third round of stimulus checks (also known as recovery rebate credits) were first delivered in March. Payments of $1,400 per person were available to those with adjusted gross income of up to $75,000. Married couples with income up to $150,000 qualify for $2,800 payments. The threshold to qualify for the full $1,400 payment is $112,500 for those who file using head-of-household status. In addition, payments of $1,400 were provided for every dependent (child and adult) claimed on either the 2019 or 2020 tax return for households that meet the income thresholds. Note that these payments are not subject to tax.
For those with incomes exceeding the thresholds outlined above, payments are smaller. Payments phase out to zero for individual taxpayers with incomes above $80,000, married couples with incomes above $160,000 and head-of-household filers with incomes above $120,000.
If you believe you should have received a payment but it has not yet arrived, information on how to check your status with the IRS can be found at https://www.irs.gov/coronavirus/get-my-payment.
Expanded unemployment benefits
ARP extended enhanced unemployment benefits of $300 per week (on top of benefits received from state unemployment programs) through September 6, 2021. Those expanded benefits have now expired and are not likely to be reinstated. Also included in the bill was unemployment assistance for the self-employed, gig workers and others who don’t qualify for state-issued unemployment benefits.
Tax exemption on 2020 unemployment benefits
ARP addressed a concern about those collecting unemployment being subject to income tax on their benefits. It exempted the first $10,200 per person (the exemption amount applies to each spouse of a married couple) of unemployment benefits received in 2020 from federal income tax. This special provision applied to individuals or couples with 2020 adjusted gross incomes of less than $150,000. Note that this same exemption is not applicable to unemployment benefits received in 2021, so some individuals may owe taxes on benefits they received.
Child tax credit
Families with children under the age of 18 can take advantage of an expanded Child Tax Credit that’s resulted in direct monthly payments of up to $300 per qualified child from July through December. Parents with children under age 6 receive a credit totaling $3,600 per child, while those with children age 6-17 receive a credit of $3,000 per child. Fifty percent of that total comes through the monthly payments in 2021 with the second half of the payment occurring in April 2022. This is expanded from a previous credit of $2,000 per qualified child.
The credit applies for single parents with incomes of up to $75,000 per year and couples with incomes up to $150,000. The $2,000 child tax credit is still available for individuals earning $200,000 per year and couples with income up to $400,000 per year.
$21.6 billion in rental aid is available for states, territories and local governments to assist households dealing with financial hardship due to COVID-19, with other housing support programs included as well.
Help for small businesses
Additional funding for Paycheck Protection Program (PPP)
ARP authorized another $7.25 billion for this program that was first offered a year ago under the CARES Act. It provided potentially forgivable loans for small businesses and other organizations that were negatively impacted by the COVID-19 pandemic. The program expired on May 31, 2021. Visit U.S. Bank Paycheck Protection Program for the most up-to-date information.
Grants for restaurants and bars
Nearly $29 billion was included in this package to fund a grant program for restaurants, bars and other food and beverage-related establishments. The grant is generally equal to an entity’s pandemic-related revenue loss. How the claimable loss is calculated varies depending on whether the establishment existed prior to 2019. The money can be used for specific purposes for a period spanning from Feb. 15, 2020 to Dec. 31, 2021.
Support for closed venues
Additional funds in this package were directed to the Shuttered Venue Operators Grant program that was established in a previous economic aid package. This is designed to support theaters, concert venues, museums and other cultural establishments hard hit by the pandemic.
Pandemic Response assistance
Provisions were included to help facilitate vaccine distribution and implementation. Nearly $9 billion was directed to federal, state, local, territorial and tribal public-health agencies to aid in delivering vaccines to Americans. Another $20 billion was put toward federal biomedical research for vaccine and therapeutic development. $25 billion is dedicated to testing and contact tracing as well as reimbursement to hospitals that were financially impacted by the pandemic.
Other essential provisions
ARP expanded the number of Americans who qualify for subsidized health insurance coverage under the Affordable Care Act (ACA). Many who obtain insurance through the ACA with incomes exceeding the previously established thresholds for subsidized coverage may qualify for some financial support to offset the cost of health insurance premiums. For 2021 and 2022, the premiums an individual pays cannot exceed 8.5 percent of income.
Those who lose their job can utilize COBRA provisions of the law to maintain employer-sponsored healthcare coverage with 100 percent of the premium subsidized from April through September 2021.
State, local and school aid
$350 billion of the total package was directed to provide aid to state and local governments that suffered a decline in tax revenue due to the pandemic. There is another $10 billion to support infrastructure projects.
Funding for educational institutions includes $122 billion for primary and secondary schools. This includes funds targeted to address learning loss caused by the interruption of school through summer school, after school learning programs and extended school years. Another $40 billion is provided to institutions of higher education to, among other things, help limit COVID risks on campuses and provide financial aid to students.
Make smart choices for today and the long run
As you assess the personal financial impact of the provisions included in the American Rescue Plan, it makes sense to talk to your financial professional and tax advisor to help you stay on track to reach your financial goals.
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