The new $1.9 trillion stimulus bill known as the American Rescue Plan Act will soon land on President Biden’s desk for signature. He is expected to sign into law this Friday. The bill contains a wide range of provisions for individuals and businesses, some of which apply to the 2020 tax year.
A few of the key provisions include:
• A third round of economic impact payments of $1,400 per person, including dependent children, for individuals earning up to $75,000 and couples earning up to $150,000. Payments will phase out for income above these thresholds with full phase out at $80,000 for individuals, and $160,000 for couples.
• Taxpayers with less than $150,000 of AGI may exclude up to $10,200 of unemployment compensation from their income for 2020. Taxpayers with AGI above the limitation are ineligible for the exclusion. The limitation is the same for both married and single filers.
• The 2021 Child Tax Credit has been increased to $3,600 for children under the age of 6 and $3,000 for children ages 6 to 17 and has been made fully refundable. Families eligible for the full credit will receive a 50% advance on the credit in the form of direct payments of $300 per month from July through the end of the year, with the balance of the credit being claimed on 2021 tax returns next spring.
• Beginning in 2021, the Child and Dependent Care Credit limitation increases from $3,000 of qualifying childcare expenses to $8,000 per child up to a maximum of $16,000. The applicable credit percentage has also increased from 35% to 50%.
• The forgiveness of certain student loans is no longer included in taxable income through 2025, setting the stage for potential forgiveness in future bills.
• The bill includes $7.25 billion in funding for new PPP loans and expands eligibility to more businesses including nonprofit entities.
• The bill includes $15 billion in funding for Economic Injury Disaster Loan (EIDL) advances.
• $5 billion has been allocated to a revitalization fund to be administered by the SBA specifically for restaurants and other food service companies that suffered losses in revenue.
• The ERC provisions expanded by the Consolidated Appropriations Act that were set to expire on July 1, 2021 have been extended through the end of the year. Additionally, startup businesses that did not previously meet ERC eligibility tests may now be eligible.
As we await further guidance and more details regarding the Act’s provisions, please do not hesitate to contact your C&J engagement team with any immediate questions.