The American Rescue Plan passed and will be signed into law at the end of the week. Here’s a look at some of the provisions in the recently passed Act:
Direct payments
- The bill allocates funds for a third economic impact payment to qualifying Americans.
- Individuals earning up to $75,000 and couples earning up to $150,000 would receive the full direct payments of $1,400 per person. Individuals will also receive an additional $1,400 payment for each dependent claimed on their tax returns.
Unemployment benefits
The American Rescue Plan extends federal unemployment insurance payments, which will remain at $300 per week in addition to the states’ benefits. — down from $400 per week in the earlier package passed by the House.
Child tax credit
- The legislation temporarily expands the child tax credit, increasing the amount to $3,000 for children ages 6 to 17 and $3,600 for children under age 6.
- The amount is gradually reduced for couples earning over $150,000 and individuals earning over $75,000 per year. Families eligible for the full credit would get payments of up to $300 per child per month from July through the end of the year.
Paycheck Protection Program
The Act includes $7.25 billion in new money for the small-business loan program is known as PPP2 and would allow more nonprofits to apply, including those groups that engage in advocacy and some limited lobbying. It also allows larger nonprofits to be eligible.
COBRA continuation coverage
- The Act provides COBRA continuation coverage premium assistance for individuals who are eligible for COBRA continuation coverage between the date of enactment and Sept. 30, 2021. The credit is allowed against the Medicare tax. The credit is refundable, and the IRS may make advance payments to taxpayers of the credit amount.
- The credit applies to premiums and wages paid after April 1, 2021, and through Sept. 30.
- A new penalty is imposed for failure to notify a health plan of cessation of eligibility for the continuation coverage premium assistance.
- Taxpayers who receive the COBRA continuation coverage premium assistance credit are also not eligible for the health coverage tax credit.
Child and dependent care credit
- The Act makes various changes to the child and dependent care credit, effective for 2021 only, including making it refundable. The credit will be worth 50% of eligible expenses, up to a limit based on income, making the credit worth up to $4,000 for one qualifying individual and up to $8,000 for two or more. Credit reduction will start at household income levels over $125,000. For households with income over $400,000, the credit can be reduced below 20%.
- The Act also increases the exclusion for employer-provided dependent care assistance to $10,500 for 2021.
Premium tax credit
The American Rescue Plan t expands the premium tax credit for 2021 and 2022. Taxpayers who received too much in advance premium tax credits in 2020 will not have to repay the excess amount. A special rule is added that treats a taxpayer who has received or has been approved to receive unemployment compensation for any week beginning during 2021 as an applicable taxpayer.
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