The American Rescue Plan Act has been approved by Congress and is on its way to President Biden, who is expected to sign the bill by the end of the week. Key provisions of the bill include the following:
Individual tax provisions:
• A $10,200 per individual unemployment insurance exclusion for the 2020 taxable year, only for households with modified AGI of $150,000 or less. If already filed for 2020, would need to amend 2020. If haven’t filed for 2020, will need to wait to file until forms are updated.
• A third round of Economic Impact Payments of $1,400 per individual and dependent (including dependents over age 17). No 3rd stimulus payment if income over $80K single or $160K married. Phaseout starts with individuals with AGI of $75K or more and married $150K or more. May not want to file 2020 yet if 2019 return on file allows for more stimulus, IRS will use last 2019 or 2020 AGI on file. Funds to possibly go out by end of March.
• Increased and fully refundable Child Tax Credits and Dependent Care Assistance Credits for the 2021 taxable year; up to $3K 6 to 17 to $3.6K per child under 6. Start to phase out for individuals earning more than $75,000 a year or $150,000 for those married filing jointly. $2K credit still available for single income up to $200K and married income up to $400K.
• An increased employer-provided dependent care assistance exclusion;
• A five-year COD exclusion for student loan forgiveness;
• Expansion and increase of the Earned Income Tax Credit;
• Increase in the Premium Tax Credit for 2021 and 2022;
• Six months of free COBRA benefits.
Business tax provisions:
• Extension and expansion of the Employee Retention Credit;
• Extension and expansion of the employer credits for paid sick and family leave benefits;
• Credits for providing subsidized COBRA benefits; and
• Restaurant revitalization grants to cover restaurant business losses.