Simply put—COVID-19 changed everything. The virus has shaped economics, healthcare, and interpersonal relationships. Since March 2020, there have been two significant stimulus packages—the $2.2 trillion CARES Act and the $900 billion Consolidated Appropriations Act. Now there is another bill, the American Rescue Plan.
The long-awaited relief bill has finally passed by a 220-211 vote. The historic $1.9 trillion coronavirus relief package was signed into law by President Joe Biden on Thursday, March 11.
What support does this bill provide? Here are the major components.
TOP PROVISIONS OF THE AMERICAN RESCUE PLAN
The American Rescue Plan is designed to support individuals, businesses, municipalities, and the economy at large. Let’s take a look at the main benefits coming your way.
DIRECT PAYMENTS
Eligible households will receive the biggest stimulus check yet, $1,400 per person plus an extra $1,400 for qualified dependents.
Phaseouts are much stricter this time around. They begin at $75,000 if filing single and $150,000 if married filing jointly. Those making over $80,000 and $160,000 respectively are ineligible for direct payments. The government will use your latest tax return to determine household income.
BILL BOOSTS UNEMPLOYMENT BENEFITS
Until September 6, 2021, unemployment benefits can see an increase of $300 (down from $400) per week. The first $10,200 in benefits will also be tax-free in 2020 (for families making less than $150,000).
Unemployment programs are also extended to September 6th.
The plan also offers a 100% subsidy for COBRA health insurance premiums, allowing unemployed people to remain on their plans through September.
SUBSTANTIAL CHILD TAX CREDIT
Americans will see a larger child tax credit—$3,600 for children under 6 and $3,000 for kids 6 through 17, subject to phase-outs.
There are several ways this credit could impact families. It allows 17-year-old children to qualify, removes the earnings stipulation, and is fully refundable. The best part? Families can receive the funds in advance. There are, of course, income thresholds to be cognizant of—$200,000 for single filers and $400,000 married filing jointly are ineligible.
DEPENDENT AND CHILD CARE CREDIT
This credit is worth up to $4,000 for one qualifying child or up to $8,000 for two or more. The act also increases employer-provided dependent care assistance to $10,500 for 2021.
PAYCHECK PROTECTION PROGRAM
This bill attempts to shore up the PPP by providing $7.25 billion in available funds.
A BREAK FOR EDUCATION (BUT NOT STUDENT LOANS)
School closures have put a significant strain on students, parents, teachers, and administrators. The plan allocates about $130 billion to K-12 schools. The funds will help schools reopen safely by reducing class sizes, purchase proper personal protective equipment, improve ventilation, among other improvements.
Deeply connected to K-12 closures is the lack of accessible and affordable childcare. The plan infuses $40 billion to childcare providers, including $1 billion to Head Start.
$40 billion is provided for higher education to provide emergency financial aid to students.
Biden’s much-discussed student loan forgiveness plan is not in this package. However, should any forgiveness law pass before January 1, 2026, the forgiven balance will be tax-free. Under normal circumstances, loan forgiveness is taxable income—a law afflicting many borrowers.
ADDITIONAL FUNDS FOR VACCINE MANUFACTURING AND DISTRIBUTION
Covid-19 vaccine manufacturing gets about a $20 billion windfall and about $50 billion will be funneled into testing and contact tracing.
HOW WILL THE BILL IMPACT YOU?
The American Rescue Plan will impact families in different ways.
Direct payments present many opportunities for individuals and families across the country. If you don’t have to use the funds to supplement daily living expenses, take advantage of other planning opportunities available to you. Strengthen your financial position, especially in light of the trials and tribulations over the past year.
As your trusted financial advisors, we are here to support you through all of life’s transitions. Let’s make the most of this aid package together. Schedule a call to learn more about how to take advantage of tax credits, grants, and loan opportunities available to you.