The new stimulus plan may have an impact on your finances. The American Rescue Plan Act of 2021 is a $1.9 trillion relief package is designed to help struggling Americans overcome financial hardship. Here’s an overview of several of its most important components that relate to individuals:
The Third Round Of Stimulus Checks
Many Americans will be receiving a third round of $1,400 stimulus checks.The IRS has already started distributing these funds via direct deposit, checks in the mail, and debit cards, just as they have in the past.
The latest stimulus is again limited by income, capped at $75,000 on single returns, $112,500 on head-of-household returns, and $150,000 on joint returns.
The American Rescue Plan will expand eligibility so that the stimulus checks are available to more Americans. Adult dependents like college students and disabled adults who were initially excluded from the first two rounds of checks will now qualify. If you have a college-age child, filing their own tax return will help initiate their receipt of this latest new stimulus. If you claim your college student as a dependent, consult your tax professional to help determine if they are eligible.
Higher Unemployment Benefits
Under the CARES Act, those who lost their jobs due to the pandemic received an extra $600 per week on top of their regular unemployment benefits. The American Rescue Plan Act will benefit those still unemployed by distributing an additional $300 per week through Labor Day in September 2021, while the pandemic continues to hinder employment opportunities. Self-employed individuals will benefit from these unemployment benefits as well but at a lower weekly benefit amount.
Child Tax Credits
Previously, the child tax credit was $2,000 per child age 16 or younger. The American Rescue Plan Act will increase the child tax credit to $3,000 per child ($3600 per child under age 6) and open up this perk to children who are 17 years old.
The $2,500 earnings floor is removed for the child tax credit, and the credit is fully refundable. Additionally, qualifying Americans will receive half of the child tax credit in advance by having the IRS send periodic payments to families from July 2021 to December 2021.
The American Rescue Plan increases the number of expenses that can be applied to the Child and Dependent Care credit on 2021 taxes from $3,000 to $8,000 if you have one child and $6,000 to $16,000 for two or more children. Since you can apply more expenses to the credit, you can save more money when you file your taxes for 2021.
Consult Your Tax Professional
It’s a good idea to review your financial and tax situation and determine if The American Rescue Plan Act of 2021 stimulus will impact you when filing your 2021 taxes.
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