President Biden has signed the American Rescue Plan Act - a $1.9 trillion stimulus plan meant to extend, renew and implement relief for those affected by COVID-19.
Below is a breakdown of some important components to this legislation, including what business owners, families and struggling individuals may need to know.
Eligible unemployed individuals may continue receiving an additional $300 in federal unemployment benefits through early September 2021.1
Small Businesses & The PPP
Overall, the bill allocates around $50 billion toward assisting small businesses affected by COVID-19.1
The Paycheck Protection Program will receive $7.25 billion, but the new legislation does not change the PPP’s end date of March 31, 2021.1 Bars, restaurants and entertainment venues heavily impacted by the pandemic will also be eligible to receive grants from the government.
Low-income communities have been some of the hardest hit financially during the pandemic. In response, the government will be allocating $15 billion toward Economic Injury Disaster Loan (EIDL) Advanced Grants. Eligible businesses in low-income communities may be able to receive up to $10,000 each.1
Employee Retention Credit
The Employee Retention Credit (ERC) will be extended through the end of 2021. With this refundable tax credit, business owners may claim up to $7,000 per employee per quarter.1
Similar to previous relief bills, eligible American taxpayers will be receiving direct stimulus payments of $1,400 as part of the new bill. Similar to previous checks, those with incomes up to $75,000 will receive $1,400 payments, while families with children under the age of 17 will receive $1,400 per dependent. Married couples with an income of $150,000 or less will receive $2,800.1
There will be a phase-out and income cap for individuals and couples who make more. Individuals earning between $75,000 and $80,000 will receive a lesser amount, with those making above $80,000 receiving no stimulus payment. The same applies for couples earning between $150,000 and $160,000 - with $160,000 being the cap.1 For head of household filers, those earning between $112,500 and $120,000 will receive a reduced amount. Those earning $120,000 will not receive a stimulus check.1
Important to note is that the initial amount paid will be based on either a taxpayer’s 2019 or 2020 income tax return (whichever is the latest return that the IRS has on file), but it will ultimately be ‘trued up’ if a taxpayer is owed money based on their actual 2020 income.
The CARES Act did not allow families of mixed-status to receive a stimulus check. This refers to households in which a U.S. citizen is married to a noncitizen. In the new package, both the U.S. citizen and their noncitizen spouse are eligible to receive a stimulus check.2
Since the stimulus check is a tax credit, it is not income and therefore is not taxable.
The IRS has created an online portal, called Get My Payment, where individuals can check the status of their stimulus check and learn what information the government may still need in order to issue a check. According to the IRS, this portal will provide important information including your payment status, payment type and whether additional information (including bank account information) is required.
Child Tax Credit
Previously, the child tax credit offered eligible families a $2,000 tax credit per child under the age of 17. With changes made under the new legislation, the child tax credit is temporarily expanding for 2021. Eligible families may receive up to $3,600 for children 5 and under and up to $3,000 for children ages six to 17.1
Here is how the American Rescue Plan is changing conditions and stipulations regarding the child tax credit:1
- The $2,500 earning floor will be waived.
- The credit will be fully refundable.
- The federal government will send eligible families credit in advance between July and December 2021.
COVID-19 Vaccination Distribution & Testing
Similar to previous legislation, a portion of the American Rescue Plan will designate funding for COVID relief. Around $15.05 billion will go toward vaccine production and distribution, while $50.8 billion will go towards testing, contact tracing, genome sequencing and global health response initiatives.1
The Federal Emergency Management Agency will receive a portion of the funds as well.
State & Local Government Assistance
States, tribal governments and cities will receive $350 billion in federal assistance. In addition, this legislation includes a $10 billion infrastructure program to help local government continue capital projects.1
FEMA Emergency Food and Shelter Program
FEMA’s Emergency Food and Shelter Program will receive $510 million to support initiatives for homeless and struggling families including:1
- Shelter and meals
- One month’s rent
- Mortgage assistance
- One month’s utility payments
Wondering how this recent legislation and other COVID-relief initiatives may benefit you? As with anything related to the current pandemic, do not hesitate to reach out if you have a questions.