American Rescue Plan Act
On March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA), which includes $1.9 trillion in relief for individuals, businesses, and state and local governments. The ARPA is the latest legislation enacted to provide economic and other relief from the effects of the pandemic. It includes some new provisions, as well as extending and expanding some provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Consolidated Appropriations Act (CAA). What follows is a rundown of the new and extended/increased provisions.
Provisions Applicable to Individuals
- Eligible individuals will receive additional direct payments (or recovery rebates) of $1,400 — plus $1,400 per dependent (including adult dependents). To qualify, individuals must have an adjusted gross income (AGI) of up to $75,000 per year, ($150,000 for married couples filing jointly and $112,500 for heads of households). The payments phase out when AGI exceeds $80,000 for individuals, $160,000 for married joint filers and $120,000 for heads of household.
- For eligible individuals, the Child Tax Credit (CTC) is increased to $3,000 per child age six to 17 and $3,600 per year for children under age six. To be eligible for the full payment, you must have a modified AGI of under $75,000 for single filers, $112,500 for heads-of-households and $150,000 for joint filers and surviving spouses. The credit phases out at a rate of $50 per $1,000 (or fraction thereof) of modified AGI over the applicable threshold.
- Parents will begin receiving advance payments of part of the CTC later this year. Under the ARPA, the IRS must establish a program to make monthly payments (generally by direct deposit) equal to 50% of eligible taxpayers’ 2021 CTCs, from July 2021 through December 2021.
Some taxpayers who are ineligible to claim an increased CTC in 2021 because their income is too high, may be able to claim the regular CTC of up to $2,000, subject to the existing phaseout rules.
- For 2021, there’s an expanded child and dependent care tax credit of up to $4,000 for childcare expenses for one child and up to $8,000 for two or more children for households with total income of up to $125,000.
- Any student loan debt forgiven between December 31, 2020, and January 1, 2026, will receive tax-free treatment.
- Those receiving unemployment benefits will be paid an additional $300 per week through September 6, 2021. In addition, the first $10,200 in unemployment benefits received beginning in 2020 is excluded from gross income for taxpayers with AGIs under $150,000. (However, for joint filers below the AGI limit, the $10,200 exclusion applies separately to each spouse.)
- There’s expanded availability of and increased Affordable Care Act (ACA) subsidies for those who obtain insurance in the ACA marketplaces, for 2021 and 2022.
- Families affected by COVID-19 may receive Federal rental assistance. This is applicable to past due rent, future rent payments, and utility and energy bills.
- The Act expands eligibility for low-income individuals with no qualifying children to claim the Earned Income Tax Credit.
Provisions Applicable to Businesses and Other Employers
- Eligible businesses serving food or drinks, including restaurants and food trucks, can receive pandemic assistance grants.
- Additional funding will be made available to fund forgivable loans to eligible businesses under the Paycheck Protection Program (PPP), which is currently scheduled to expire on March 31, 2021.
- Expanded PPP eligibility for nonprofit organizations and online news services.
- New targeted Economic Injury Disaster Loan grants will be available for eligible small businesses in low-income communities.
- The Employee Retention Tax Credit is extended for eligible employers that continue to pay employee wages during COVID-19-related closures or experience reduced revenue through December 31, 2021. This includes “recovery startup businesses” (those launched after February 15, 2020, with average annual gross receipts of $1 million or less).
- Tax credits for paid sick and family leave are modified and extended to September 30, 2021.
- The excess business loss limitation is extended through December 31, 2026.
- The Section 162(m) limits on the tax deduction that public companies can take for executive compensation is extended to cover the CEO, the CFO and the five next highest paid employees, beginning in 2027.
We are here and available to assist with determining which of the many provisions can benefit you and/or your business. Contact us at firstname.lastname@example.org or (408) 287-7911. For more information and updates, check out our Covid-19 Resources & Updates webpage.