American Rescue Plan – Individuals
ECONOMIC IMPACT PAYMENTS
The American Rescue Plan provides for a third round of economic impact payments, commonly known as stimulus payments, of up to $1,400 per adult and any dependent. This time the earnings maximums are $80,000 for single filers, $120,000 for head of household and $160,000 for married filing jointly. For those with a direct deposit on file with the IRS payments should begin arriving immediately, those receiving checks should do so over the next several weeks.
The American Rescue Plan extends the federal unemployment insurance expansion through September 6,2021. The law maintains the federal supplement at its current level of $300 a week for weeks beginning after March 14th and before September 6th, 2021.
The Act also contains a provision that exempts the first $10,200 of unemployment benefits received in 2020 from income tax. The provision is retroactive and applies to benefits received in 2020. This provision only applies to individuals with income below $150,000.
EXPANDED CHILD TAX CREDIT
The American Rescue Plan expands the child tax credit and allows for taxpayers to receive the credit in advance of filing a return. The Act increases the credit to $3,600 for children under 6 and to $3,000 for children age 6 to 17. The Act also makes the credit fully refundable for 2021. The credit begins to phase out for taxpayers with incomes over $75,000 for single filers, $112,500 for head of household filers and $150,000 for married filing jointly filers.
Under the Act the IRS is directed to estimate a taxpayers’ child tax credit for 2021 and begin paying out one-twelfth of that amount monthly beginning in July. Meaning taxpayers receiving the full credit for a child under 6 would receive payments of $300 monthly. This advanced payment of the credit will need to be reconciled with the actual credit as part of the 2021 return process. The IRS has also been directed to set up an online portal to allow tax payers to opt out of the advanced credit or to provide additional information that may be relevant to modifying the amount that should be advanced.