Main Updates from the (ARP) – Stimulus Bill
This week, the massive $1.9 trillion dollar American Rescue Plan was signed into legislation. There are several tax implications and updates for 2020 and 2021 that will affect most Americans and taxpayers in some way. Here is a brief summary of the updates and changes from the bill.
Stimulus Payments – $1400 per person including dependents
This started out as a proposed amount of $2000 and was finally agreed on a whopping $1400 per person.
Example – If you have a family of four you will be eligible to receive a total of $5600 IF your taxable income falls within the phase out ranges that have been updated for this round of stimulus payments. The phase out ranges are $75,000 (if filing single) and $150,000 (If married). One change is that if you make more than the phase out limits, you will be completely excluded from receiving the stimulus payments. Prior to this bill, you would still be eligible, but the payment amount was reduced based on your income in excess of the phase out limit. Payments are being issued in two rounds and will be based on your most recent tax filing. We do not know when these payments will begin to be processed, but they may begin to go out as early as next week.
Unemployment Benefits are now partially Non-Taxable for many people
We have extended many tax returns waiting for an update on the taxability of unemployment benefits received in 2020. It’s finally here, at least from the federal government. The first $10,200 in unemployment benefits is non-taxable, but only for those individuals making less than $150,000 in 2020. If we have filed your tax return for 2020 already and included your unemployment benefits as taxable, we will need to amend your tax returns at a later date. We will contact you directly if this applies to you.
The Child Tax Credit has been expanded for 2021
The American Rescue Plan bill has increased the Child Tax Credit to $3600 per child under the age of 6 and $3,000 per child between the ages of 6-17 yrs. Old. The credit for dependents over the age of 18 yrs. old has not changed and remains $500. This change in the bill is for 2021 only at this point but it may become a permanent change at a later date. Like the stimulus payment of $1400 there are phaseouts that may come into play for anyone making $75,000 (if filing single) and $150,000 (If married).
For anyone that is “phased out” by the income limits, you will still be eligible to receive the original credit amount of $2000 per child, but you will not be eligible for the additional funds outlined in this bill. There is also an advance option that will be paid monthly from July 2021 to December 2021. According to the bill, the IRS will issue half of the credit monthly with payments starting at $300 per month for children under the age of 6 and $250 per month per child from the ages of 6-17 years old. Yes, they have complicated this for no apparent reason!
Unemployment Benefits have been extended
The federal assistance of $300 in unemployment benefits has been extended through September 6, 2021. These benefits were set to expire on March 14th. It looks like this may be the final extension for these benefits.