Now that President Biden has signed off on the American Rescue Plan Act of 2021 (ARPA), let’s review where its $1.9 trillion in spending is expected to go.
Additional Unemployment Benefits: Supplementing state unemployment benefits, unemployed workers will receive an additional $300 weekly in Federal funds through September 6, 2021. The first $10,200 will be tax-free for households with annual income under $150,000.
Recovery Rebates: Households under prescribed income levels can expect direct $1,400 stimulus payments for each eligible individual in the household. This includes the taxpayer; their spouse (if they are filing jointly); and any dependents they are claiming, regardless of age. However, the rebates start phasing out for single filers reporting $75,000 in annual income, disappearing entirely at $85,000. They phase out for joint filers at $150,000, disappearing at $160,000.
Child Tax Credit (CTC): The CTC was $2,000 annually for children up to age 16. For 2021 only (so far), it’s increased to $3,000 for children aged 6–17, and $3,600 for children younger than six. To qualify, AGI can’t exceed $75,000 for single filers and $150,000 for joint filers. Partial advance payments will start later this year, at 50% of what the IRS estimates it will “owe” each eligible family from July–December.
Child and Dependent Care Tax Credit: For 2021 only (so far), eligible expenses increased to $8,000 for one child (from $3,000), and to $16,000 for two children (from $6,000). Also, there are fewer hurdles limiting eligibility for claiming available credits.
Student Loan Debt: If any student loan debt is forgiven, it will be income-tax-free.
Affordable Care Act Credits: Increased income limits make it easier to qualify for increased benefits.
Federal Rental Assistance: Rental assistance is available to families affected by COVID-19.
With the 2021 ARPA, plus five major relief bills passed in 2020, Congress has now injected a total $5.3 trillion into the economy—even as COVID cases are down, vaccine rates are up, and the economy is beginning to improve. Will this last influx help more or hurt more in the long run? Time will tell.