NEW COVID RELIEF BILL: The American Rescue Plan 2021
INDIVIDUALS
Stimulus Checks
How much will I get? The bill includes stimulus checks – an advance on a 2021 tax credit – in the amount of $1,400 for individuals earning up to $75,000 a year, couples earning up to $150,000 a year, and heads of household earning up to $112,500 a year. The credit completely phases out at $80,000 for individuals, $160,000 for couples, and $120,000 for heads of household. Taxpayers will also receive an additional $1,400 per dependent, which now includes dependents over 17.
How is the credit calculated? The calculation will be based on the Adjusted Gross Income (AGI) on 2019 returns, unless a 2020 tax return has already been submitted. If a larger credit is calculated upon submission of a 2020 return, the difference will be delivered to the taxpayer by Sept 1st, 2021.
When will I receive it? The stimulus checks could be sent out within days of being signed by the President.
Unemployment Compensation
The federal unemployment boost has been extended until September 6th, 2021 in the amount of $300/week. For taxpayers with less than $150,000 in AGI, the first $10,200 worth of unemployment benefits received in 2020 will no longer be subject to federal taxes. However, it may still be subject to state income taxes. In the case of joint returns, the tax suspension applies to the first $10,200 that each spouse receives, up to $20,400 total.
Child Tax Credit
Who qualifies? The increased Child Tax Credit is only available for the 2021 tax year. 17-year-old dependents are now eligible for the full credit. The credit has also been increased from $2,000 to $3,000 (or $3,600 for children under six). The full credit increase is available to individuals, couples, and heads of household with income under $75,000, $150,000, and $112,500, respectively.
How will I receive it? The credit will be distributed in periodic payments, with $250 per dependent (or $300 per child under six) paid monthly between July and December 2021, and the remaining $1,500 per dependent (or $1,800 per child under six) provided as a refundable credit on 2021 tax returns.
What if I no longer qualify on my 2021 return? If it is determined upon filing a 2021 tax return that you no longer qualified for the full amount to the child tax credit that you received, you may be required to repay the credit. The IRS will be creating an online portal to declare any changes in income, marital status, or qualifying dependents. If you are anticipating any significant changes, you can also opt out of the advance monthly payments and take the full credit on the 2021 return instead.
Dependent Care Credit
The increased Dependent Care Credit is only available for the 2021 tax year. The credit is now equivalent to 50% of the qualifying expenses for returns with adjusted gross income under $125,000. Families earning between $125,000 and $400,000 would receive a partial credit. The eligible expense limitations used to calculate the credit have been increased to $8,000 per qualifying dependent and $16,000 for two or more qualifying dependents. The increased dependent care credit is refundable.
BUSINESSES
Restaurant Revitalization Grants
The bill includes new grants available to restaurants, or other eligible businesses that primarily serve food or drinks. The grant amount is equivalent to the pandemic-related revenue loss – gross receipts in 2020 minus gross receipts in 2019 – and reduced by any PPP loans received. The grant is limited to $5 million per location and $10 million per entity (including any affiliated businesses). The grant is not subject to federal income tax. For the first 21 days, the SBA will prioritize businesses owned by women, veterans, or socially and economically disadvantaged individuals.
Payroll Protection Program Changes
View our blog post regarding recent modifications to the PPP loans here.