​What the Newest COVID-19 Stimulus Package Means for Your Taxes

The recently passed $1.9 trillion stimulus package has some far-reaching tax implications for the short and long term.

Here are some of the highlights from the American Rescue Plan Act of 2021 that might affect your taxes:

• Individuals who make less than $75,000 a year will receive $1,400 checks. For couples making up to $150,000 a year, the payment doubles to $2,800. The checks phase out entirely for individuals making $80,000 and above for the year and couples who make $160,000 or more annually. Taxpayers below these income thresholds are also eligible to receive $1,400 per dependent.

As was the case with the two previous stimulus payments, these latest stimulus checks are fully refundable credits against your 2021 taxes.

Also, adult dependents —including college students and disabled adults — may be eligible for payments for this round.

Your 2020 financial and tax information will determine your stimulus check, so talk to a professional about the best time to file for you.

• Those who received unemployment benefits in 2020 won’t owe taxes on up to $10,200 of benefits if they make less than $150,000 a year. The IRS recently issued new guidance that says jobless benefits don’t count toward the $150,000 threshold.
• The number of people who are eligible for the Child Tax Credit has expanded, and the benefit itself increased by about 80% per child. Most parents will now get up to $300 a month for each child younger than 6 and as much as $250 per month for children ages 6-17. Right now, the new child tax credit amounts are approved to last for one year, though many in Congress say they want to make the changes permanent.
• Changes to the Affordable Care Act expanded its eligibility and capped the maximum premium at 8.5% of an individual’s income. There are also increases to the premium tax credits, so those who received too much in tax credits in 2020 won’t have to pay back the excess. Those who already receive premium tax credits can recalculate their subsidy after the new rules take effect, which is slated to start April 1, by updating their account on healthcare.gov. The act also includes extensions to credits for paid sick leave and family leave to September 2021, and an Employee Retention Credit extension until Dec. 31, 2021. The bill also eases certain pension provisions and repeals the worldwide interest allocation provision.
• Through 2025, student loan forgiveness is exempt from income taxes.

If you have any questions about how this latest stimulus package affects your taxes or financial situation, let us know.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.