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Impacts of the American Rescue Plan Act of 2021

Michael Insogna

The American Rescue Plan Act of 2021 (a.k.a. the 3rd COVID-19 stimulus package) was passed by Congress and signed into law by President Biden on March 11, 2021. It is a $1.9 trillion stimulus package intended to speed the US recovery from the economic challenges and health effects of COVID-19. This client note outlines the key provisions of the Act and offers some of our general guidance on its impacts.

  • $1,400 stimulus payments (referred to as “Recovery Rebates”) to all eligible individuals earning up to $75,000 ($150,000 for married couples), phasing out at $80,000 ($160,000). While it is a quicker phase-out than the previous $600 payments in 2020, the 2021 payments are available to all dependents in a household, including adult children who are claimed as dependents.
    • Note: income eligibility for advance receipt of 2021 rebates is based on the most recent AGI information the IRS has on file. This could be 2020 tax returns (if already filed) or 2019 tax returns, though there is still an opportunity to qualify based on filing 2021 tax returns, in which case any rebates will be applied as credit on the 2021 tax return.
    • Also of note, there are no clawback provisions of any paid-out 2021 recovery rebates received in case income has increased.
  • $300 additional unemployment payments extended through Labor Day (Sep 6, 2021), and notably the first $10,200 in benefits retroactively received in 2020, won’t be taxable for households earning less than $150,000.
  • The Child Tax Credit increases to $3,600 for children under age 6, and to $3,000 for children up to age 17.
  • $170 billion is aimed at schools, with $130 billion for funding K-12 schools to help with reopening (i.e., improving ventilation, reducing class sizes, enabling social distancing, additional PPE, and hiring support staff) and to address learning loss due to school shut-downs, and $40 billion for colleges and universities for emergency grants.
  • $85 billion of new funding will be directed towards COVID testing, contact tracing, vaccinations, and increasing the public health workforce.
  • $350 billion is being targeted as relief for state, local, and tribal governments.
  • $90 billion for transportation and infrastructure.
  • The Act does not include any student loan forgiveness provisions but does allude to the prospect of future debt forgiveness.  Should the Biden administration or Congress decide to cancel any student loan debt in the future, it appears it will be done tax-free.
  • The IRS has extended the federal tax filing and payment deadline for 2020 tax to May 17, 2021.
    • The deadline for contributions to IRAs and HSAs has also been extended to May 17.
    • No final word yet on state filing deadline changes.
    • Q1 2021 estimated payment deadline has not been changed thus far.  If you owe Q1 estimated tax the deadline is still April 15.
    • Also, at this time the deadline for any extensions on 2020 tax filing and payments has not changed and is still October 15.

  This note is intended as a general guide for our clients, but as always, if you’d like to discuss your particular financial situation with us in detail, please don't hesitate to reach out to arrange a meeting.   

Regards,

Mike