The American Rescue Plan

What Is the American Rescue Plan? The American Rescue Plan Act of 2021 is a $1.9 trillion coronavirus rescue package created to aid the United States’ recovery from the economic and health effects of the COVID-19 pandemic. The plan was signed into law by President Biden on March 11, 2021. While there are a lot of changes within this plan, we’re going to concentrate on a few of the details that we find most important.

Stimulus Checks

Individuals and couples who make $75,000 and $150,000 or less, respectively, are eligible for the full $1,400 stimulus funds. The payments start diminishing for an individual once adjusted gross income exceeds $75,000 and go to zero once income hits $80,000. For married couples, the phaseout is $150,000-$160,000.

Those with children will receive $1,400 for each dependent child. For example, a family of four, within the income limits, would receive $5,600. It is estimated that 85% of Americans will be eligible for the payments. Some Americans started seeing funds being deposited into their accounts as early as last weekend. Most Americans, however, won’t get payment right away as the IRS anticipates continued disbursements during the next several weeks. The IRS has created the “Get My Payment” tool on the IRS.gov website for individuals and families to track the status of their payment.

Unemployment Benefits

The American Rescue Plan Act extends Pandemic Unemployment Assistance (PUA) benefits of $300 a week through September 6, 2021 and increases the total number of weeks available from 50 to 79. Federal Pandemic Unemployment Compensation (FPUC) benefits of $300 are also extended through Sept. 6, 2021.

They also included verbiage that allows for the first $10,200 in 2020 benefits to be tax free for families making $150,000 or less. People who had taxes withheld from unemployment benefits in 2020 will be able to recover them when they file their 2020 taxes. If you’ve already filed your taxes for the year, you’ll be able to amend your 2020 taxes to take advantage of this change. This Act also provides a 100% subsidy of COBRA health insurance premiums for unemployed workers who remain on their employer healthcare plans through the end of September. 

Child Tax Credit

The act also increases the Child Tax Credit maximum to $3,000 a year for each child ages 6 to 17, and $3,600 for each child under age 6 for couples who make $150,000 or less and single parents who make $112,500 or less. According to current language, payments will be sent by direct deposit on a monthly basis.

A family would receive $300 per month for each child under 6 and $250 per month for each child ages 6 to 17. The new act will provide one year of credit payments. The thought is regular payments will help families pay for ongoing costs instead of claiming a credit when they file their taxes. The credit is refundable, meaning everyone who qualifies will get it no matter their tax situation.

While these are only a few of the important changes within the American Rescue Plan, we think it’s as important as ever to work with a professional to better understand what impact this could have on you and your families’ unique situation.  

Ben Webster, CFP® and Derek Prusa, CFA, CFP®

Co-Founders and Owners of Aspire Wealth