Damian Dunn — Author’s Note: As of this writing, the American Rescue Plan Act had yet to be signed into law. This is a high-level summary of some of the pieces in the proposed bill. Please monitor reputable news outlets for updates.
It is expected that the House of Representatives will accept and pass the Senate version of the American Rescue Plan Act (ARPA) soon providing additional aid to individuals/families and stimulus to our rebounding economy. A number of provisions will be familiar but may have slight, but important, changes. Let’s look at some of the headline proposals.
Direct Stimulus Payments: The section of this bill that gets most of the attention is the direct payments to families and individuals. This round of payments would provide $1,400 in assistance to individuals earning less than $75,000 and families earning less than $150,000 annually. Two notable changes to be aware of compared to the previous two payments are:
- The income phase-outs are much lower. Individuals who make $80,000 and families who make $160,000 will receive zero benefits.
- Adults, children, and adult dependents such as college students and elderly relatives are eligible for payments. In prior rounds, adult dependents were excluded.
If your 2020 income will prevent you from receiving any benefits, but your 2019 income would qualify you, you can delay filing your 2020 tax return and your need will be based on your 2019 tax return. Likewise, if neither your 2019 or 2020 return would qualify you currently, but your 2021 income will qualify you, you’ll have the opportunity to claim these benefits when you file your taxes next spring. If your 2020 income would qualify you to receive a benefit, but your 2019 income would not, you should consider filing your 2020 return electronically immediately if you’re able to.
If you have a child in 2021, you’ll be eligible to claim an additional $1,400 on your tax return next year.
Unemployment Benefits: ARPA provides an additional $300 per week of benefits to the checks of those currently receiving unemployment through September 6th. Furthermore, it has been proposed that the first $10,200 of unemployment benefits be deemed nontaxable for 2020 for households making less than $150,000. If you’ve already filed your 2020 taxes and received unemployment benefits, you may want to consider filing an amended tax return if this passes into law.
Child Tax Credit: A one-year benefit would increase the child tax credit to $3,000 per child and $3,600 for children 6 and under (an increase from $2,000 per child). This version would also allow kids 17 and under to qualify (up from age 16). Additionally, the credit would be fully refundable and up to half of the credit could be paid to families directly on a monthly basis between July and December of 2021. Eligibility will be based on the latest tax return filed with the IRS. Keep in mind that if your income is over $80,000 as an individual, or $120,000 as a family in 2021, you may have to repay some or all of the amount as an overpayment on next year’s taxes.
Eviction and Foreclosure Moratoriums: No changes have been proposed to the current moratoriums which expire March 31st. The legislation does provide an additional $30 billion for rent assistance and $10 billion for mortgage assistance.
Minimum Wage: The provision to increase the minimum wage to $15.00 over a period of 4 years could not be included in the Senate version of the bill and has been dropped from the legislation.
Damian is the lead Financial Concierge on Your Money Line, the financial help line serving all Pete the Planner® Financial Wellness clients. Damian is a CERTIFIED FINANCIAL PLANNER™ professional and loves answering your money questions. Despite sharing a last name and sense of humor, Damian and Pete are not related.