On March 11, President Biden signed into law the American Rescue Plan Act of 2021. The $1.9 trillion COVID relief package provides a third round of direct payments to most Americans, extends jobless benefits, and includes money for expanded vaccine distribution and virus-testing programs. The plan also includes funding for schools, businesses, local and state governments, and healthcare subsidies.
Below is a summary of highlights of the bill, which includes provisions for both individuals and businesses.
Direct Cash Payments
- Stimulus checks of $1,400 per taxpayer for married taxpayers earning less than $150,000 per year, heads-of-households making less than $112,500, and individuals earning less than $75,000.
- This includes an extra $1,400 for each of a family’s dependents. Unlike the previous two rounds of relief, adult dependents are eligible for the payments.
- Payments are reduced and phase out completely for married taxpayers earning $160,000 per year ($120,000 for heads-of-household, and $80,000 for individual taxpayers).
- Eligibility for the relief payments is based on the taxpayer’s 2019 or 2020 tax return.
Enhanced Unemployment Benefits
- The weekly $300 supplemental unemployment benefit that was set to expire in mid-March has been extended until September 6, 2021.
- The first $10,200 of unemployment payments made to households with annual incomes under $150,000 will be provided tax-free. This applies to unemployment payments received in 2020.
- Although the dollar amounts are the same, there are two separate programs to administer the benefits depending on the type of work performed. Freelancers, gig workers, independent contractors and certain people affected by COVID-19 will receive benefits through the Pandemic Unemployment Assistance program.
- For those in the traditional state unemployment system, the increase will be provided by the Pandemic Emergency Unemployment Compensation program.
Child Tax Credits
- For 2021, some families with minor children can claim an enhanced credit providing $3,600 per child under age 5 or $3,000 per child ages 6 to 17. This is an increase from the current credit, which provides up to $2,000 for each child under the age of 17.
- The enhanced portion of the credit will be available for single parents with Adjusted Gross Incomes (AGI) up to $75,000 and married filers with AGI up to $150,000 per year.
- Families will receive payments on a monthly or periodic basis, rather than a lump sum at the end of the year to help cover expenses and make budgeting easier.
- Eligible families will also receive a tax credit for up to 50% of eligible childcare expenses in 2021, up to a maximum credit of $4,000 for one child or dependent, and $8,000 for two or more children or dependents. Credit reduction starts for families earning more than $125,000 per year.
- The bill provides two years of increased federal subsidies for those buying health insurance through the Affordable Care Act (ACA) marketplace. Currently, enrollees pay not more than around 10% of their income towards coverage. Additional subsidies reduce that to 8.5%.
- Those enrollees with lower-income, or who are collecting unemployment benefits, could see their premiums eliminated for 2021.
- Recently laid-off workers may remain on their former employer-paid health insurance through COBRA. The government will pay 100% of COBRA premiums through the end of September 2021.
Highlights for Small Businesses
- The Paycheck Protection Program (PPP) is provided an additional $7 billion dollars in funding. Eligibility for PPP loans has been modified to include some online businesses and larger non-profit entities with fewer than 500 employees. However, the bill did not extend the PPP’s current application window, which is scheduled to close March 31, 2021.
- The Emergency Injury Disaster Loan Program (EIDL) is provided an additional $15 billion in targeted funding. Eligible businesses must employ fewer than 300 employees and have suffered an economic loss greater than 30% between March 2, 2020 and December 31, 2021 to apply for a loan of $1,000 per employee, up to $10,000.
- The Employee Retention Credit is extended until the end of 2021. The new bill provides a credit of up to $7,000 per employee per quarter during the last half of the year in addition to the existing provision.
- Tax credits for paid sick and family medical leave, originally enacted Families First Coronavirus Response Act (FFCRA), are extended through September 2021. The FFCRA provides refundable payroll tax credits for employers to assist with the cost of providing Coronavirus-related leave to their employees.
- Bars and restaurants, especially hard-hit by lockdowns, are aided $25 billion through the new Restaurant Revitalization Fund (RRF). The grant amount is equal to the difference between gross business receipts in 2019 and gross receipts for 2020, up to $10 million per entity, or $5 million per physical location.
- Movie theaters, museums, performance venues, and other live event businesses are eligible for part of a similar $1.25 billion grant. The grant amount is for 45% of the gross revenue for the business in 2019, or $10 million, whichever is smaller.
Additional Miscellaneous Provisions
- State and local government aid. $350 billion is to be distributed between states, cities, tribal governments, and U.S. territories. A formula that targets areas of the greatest need will determine how the money is distributed.
- Vaccines and virus-tracing. $8.75 billion is earmarked for vaccine distribution, testing, and contact-tracing efforts.
- Student loans. Through 2025, student loan forgiveness for eligible borrowers will be provided income-tax-free.
- Extended housing relief. The bill sets aside $30 billion in assistance for renters and landlords and extends the eviction and foreclosure moratoriums until Sept. 30, 2021.
- Airlines will receive a third round of payroll support. The current program, which protects 27,000 workers, is set to expire this month. The new bill provides $15 billion to prevent layoffs through the end of September. The same prohibitions on executive compensation and stock buybacks from the previous aid package remain in effect.
- Transit agencies will receive $30.5 billion in grants to help with losses they’ve experienced due to declining ridership during the pandemic. Amtrak will receive $2 billion for the same reason.
The preceding information is a limited summary of the legislation and intended to be informative, yet general enough to make the 600+ page bill understandable. Over the coming weeks and months, we’ll be considering how these changes impact each of our clients’ financial plans and financial well-being.
Please contact your JFS Wealth Advisors team with any questions or concerns relative to your personal situation. As always, we deeply appreciate the trust and confidence that you place in us.