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LATEST TAX UP-DATES 2021

American Rescue Plan Act of 2021 Summary
            

  Post Date:  3/16/2021
            
Last Updated:  3/16/2021
            

  Summary
            
The following is a brief summary of key   provisions included in the American Rescue Plan Act of 2021, signed into law   March 11, 2021.
  
  Unemployment Benefit Exclusion for 2020
  Effective for 2020 only, the first $10,200 of unemployment compensation, per   person, is excluded from taxable income if modified adjusted gross income is   $150,000 or less.
  
  Premium Tax Credit
  Effective for 2020 only, any advance payment that exceeds the Premium Tax   Credit allowed is disregarded and does not increase tax liability on the   return. This suspension applies to all taxpayers regardless of income level   as a percentage of the federal poverty level.
  
  Recovery Rebate and Round 3 Stimulus Payment
  Eligible individuals may qualify for a 2021 rebate amount of up to $1,400 per   taxpayer ($2,800 MFJ), plus $1,400 per dependent. This stimulus payment for   dependents is not limited to dependents who are under age 17. The payment   starts to phase out when AGI exceeds $75,000 (Single, MFS), $150,000 (MFJ,   QW), and $112,500 (HOH) and is fully phased out at $80,000 (Single, MFS),   $160,000 (MFJ, QW), and $120,000 (HOH).
  
  Unemployment Benefits Extended
  The enhanced $300 per week of Pandemic Unemployment Assistance and Pandemic   Emergency Unemployment Compensation is extended to September 6, 2021.
  
  Child Tax Credit
  Effective for 2021 only, the Child Tax Credit (CTC):
  - Is increased to $3,000 per qualifying child,
  - Is $3,600 in the case of a qualifying child age five or younger as of   December 31, 2021,
  - Age limitation is increased from age 16 to age 17, and
  - Is fully refundable.
  
  Phase-out. The increased CTC (over the $2,000 prior amount)   phases out when modified AGI exceeds $75,000 (Single, MFS), $150,000 (MFJ,   QW), and $112,500 (HOH).
  
  Once the increased CTC is phased-out, the $2,000 per qualifying child still   applies until modified AGI reaches the previous thresholds.
  
  Advance Payment of the Child Tax Credit
  The IRS is instructed to establish a program for making periodic payments to   taxpayers for the advance payment of the Child Tax Credit. The advance amount   will be estimated by the IRS. The IRS will establish an on-line portal which   allows taxpayers to elect not to receive advance payments, or to update   relevant information to calculate the advance payment. Advance payments will   be made during the period July 1, 2021 through December 31, 2021.
  
  Earned Income Credit
  Effective for 2021 only, the Earned Income Credit for individuals without a   qualifying child is expanded. The investment income limitation for 2021 is   increased from $3,650 to $10,000 and indexed for inflation in future years.   Effective for 2021 only, if earned income for 2021 is less than 2019 earned   income, the taxpayer may elect to used 2019 earned income when calculating   the 2021 EIC.
  
  Dependent Care Expense Credit
  Effective for 2021 only, the Child and Dependent Care Expense Credit is   refundable. The dollar limitation on expenses paid for a qualifying person is   increased from $3,000 to $8,000 for one qualifying person and from $6,000 to   $16,000 for two or more qualifying persons. The maximum percentage of 35% is   increased to 50% for AGI up to $125,000 with the credit percentage phasing   out and reduced to zero when AGI reaches $438,000.
  
  Dependent Care Assistance Program
  Effective for 2021 only, the $5,000 maximum exclusion in increased to $10,500   ($5,250 MFS).
  
  Student Loan Forgiveness Exclusion
  For tax years 2021 through 2025, any discharge of student loan debt for any   reason, including private student loans, may be excluded from taxable income,   as long as there is no provision for the student to provide services to the   discharging lender.
  
  Payroll Tax Credits
  The new law reinstates the $511/$200 per day 100% refundable payroll tax   credit for employees who receive paid sick leave or paid family leave for   reasons related to COVID-19. The new law also modifies the reasons for these   payments.
  
  Paid Sick Leave Credit. This credit is available for the period   beginning on April 1, 2021 and ending on September 30, 2021.
  
  Paid Family Leave Credit. The new law extends the period for this   credit for the period beginning on April 1, 2021 and ending on September 30,   2021. This credit is limited to $12,000 in the aggregate for all calendar   quarters, including the quarters prior to April 1, 2021.
  
  Self-employed individuals. The self-employed qualified sick leave   equivalent amounts and qualified family leave equivalent amounts are also   extended for the same time periods.
  
  Employee Retention Credit
  The new law extends the Employee Retention Credit to wages paid after June   30, 2021 and before January 1, 2022 and generally follows the same rules that   are in effect for the first half of 2021.
  
  COBRA Coverage Assistance
  The new law provides funding to help pay premiums for COBRA continuation   coverage.
  
  Paycheck Protection Program (PPP)
  The new law appropriates additional funds for the PPP and makes some minor   modifications.
  
  SBA Loans and Grants
  The new law includes provisions that excludes additional SBA grants from   income.
  
  Limitation on Excess Business Losses of Non-Corporate Taxpayers
  The limitation on excess business losses is extended to tax years beginning   before January 1, 2027.
  
  Pensions
  Financial assistance is provided to eligible underfunded multiemployer   pension plans for plan years 2020 through 2022 Shortfall funding for single   employer plans may be amortized over a longer time frame.
              
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