AMERICAN RESCUE PLAN ACT 2021
How the ARPA Affects You
The latest legislation providing economic and other relief from COVID-19 has passed Congress and President Biden is expected to sign it into law. The American Rescue Plan Act (ARPA) includes $1.9 trillion towards funding for state and local governments, businesses, and individuals.
The ARPA is meant to expand and extend major provisions made in the CARES and Consolidated Appropriations Acts. New provisions have also been made specifically for relief towards families and businesses that you can take advantage of.
Highlights for Individuals, Businesses and Employers
Listed here are the main takeaways that could affect you, your family, or your business:
- Another round of recovery rebates (or direct deposits, also commonly known as stimulus payments) of $1,400, with an additional $1,400 per eligible dependent, will be provided to qualifying individuals. Individuals are required to have an adjusted gross income (AGI) up to $75,000, $150,000 for married filing joint couples. $112,500 for heads of households. Phase outs and disqualification apply when the AGI is greater than $80,000 for individuals. $160,000 for married filing joint couples, and $120,000 for heads of households.
- The Child Tax Credit (CTC) will increase to $3,000 of each child from six to 17, and $3,600 per year for children under six. The full payment will be given to individuals that have a modified AGI of under $75,000, $150,000 for married filing joint couples and surviving spouses, and $112,500 for heads of households. If your income in any of these categories is above the modified AGI threshold. $50 for every $1,000 phase-out will apply to the CTC.
- Parents will receive advanced payments of the CTC later this year. The ARPA has directed the IRS to create a program to make monthly payments (usually through direct deposit) equal to 50% of 2021 CTCs from July 2021 through December 2021 to eligible taxpayers.
- Taxpayers who will not be eligible for the increased CTC in 2021. This being due to their income being over the threshold might be able to claim the usual $2,000 per child. Although this will also be subject to the normal phase-out rules.
- For 2021, the child and dependent care tax credit has been expanded up to $4,000 for childcare costs for a single child, and up to $8,000 for two or more children in households making up to $125,000.
- If your student loan debt is forgiven between December 31, 2020 and January 1, 2026, it will be treated as tax-free.
- Unemployment benefits have been expanded by $300 per week and will be paid through September 6, 2021. The ARPA also states the first $10,200 in unemployment benefits received starting in 2020 won’t be included in gross income for taxpayers with AGIs under $150,000. Joint filing couples under the AGI limit will have the $10,200 applied to each spouse.
- For those who have insurance in the Affordable Care Act (ACA) marketplace. There’s an expanded availability of and increased ACA subsidies for 2021 and 2022.
- Families affected by COVID-19 can qualify for federal rental assistance that apply to past due rent, future rent payments, and utility and energy bills.
- The ARPA also expands the eligibility for low-income taxpayers with no qualifying children to claim the Earned Income Tax Credit.
Businesses and Employers
- Grants for pandemic assistance will be made to qualifying businesses. Businesses that serve food and/or drinks, including restaurants and food trucks.
- Additional funding for Paycheck Protection Program (PPP) (scheduled to expire on March 31, 2021) forgivable loans to eligible businesses is available.
- Expanded PPP eligibility will be available for non-profit organizations and online news services.
- New Economic Injury Disaster Loan grants are aimed and available to small businesses in low-income communities.
- The Employee Retention Tax Credit has been extended for qualifying employers that have continued to pay employee wages during COVID-19 closures. Also reduced revenue through December 31, 2021. Recovery startup businesses (businesses that have launched after February 15, 2020 with average annual gross receipts of $1 million or less) are included.
- Paid family and sick leave tax credits are modified and extended to September 30, 2021.
- The excess business loss limitation has been extended through December 31, 2026.
- The tax deduction public companies can take for executive compensation under Section 162(m) limits has been extended. This is to cover CEOs, CFOs, and the five next highest-paid employees starting in 2027.
Capitalizing on the Benefits
The ARPA could be one of the last major legislative relief packages related to the COVID-19 pandemic. Contact us to get more information on how the ARPA affects your circumstances. Also how you can best utilize the benefits available to you, your family, or your business.