With 242 pages in the American Rescue Plan Act (ARPA) bill, there is a plethora of information. In this article, we focus on how the legislation specifically impacts American households. There are four main areas for how families and individuals are impacted by ARPA.
The ARPA authorizes the Treasury department to make payments of up to $1,400 per individual. Individual tax filers can earn up to $75,000 in Adjusted Gross Income (AGI) and receive the full $1,400 stimulus check. Those individual tax filers with an Adjusted Gross Income above $80,000 are not eligible to receive a stimulus check.
These income limits are doubled for families that file Married Filing Jointly.
Payment amounts are determined the either 2019 or 2020 tax filings, depending on the most recent tax filing on record with the IRS.
Because the stimulus check is technically a tax credit for 2021 tax returns, filers eligible for the stimulus based on 2020 but not 2019 tax returns can claim a credit on their 2021 tax return.
This same approach applies to eligible applicants with a child born in 2020. While the child is not captured on the 2019 tax return that may be used for processing stimulus checks, the credit would be claimed on the 2021 tax return.
You can calculate your eligibility for the most recent stimulus check by clicking here to use Kiplinger's online calculator.
The federal eviction moratorium was not extended and will expire on March 31, 2021.
The Federal Unemployment payment of $300 per week is extended to September 6, 2021.
Tax filers who have an AGI less than $150,000 will not be taxed on the first $10,200 of 2020 unemployment benefits per recipient. So a Married Filing Jointly family with an AGI less than $150,000 can receive up to $10,200 per spouse in tax-free 2020 unemployment benefits. This benefit is phased out at $160k in Adjusted Gross Income for 2020.
Student Loan Discharge Taxation
The ARPA directs the IRS to not tax the value of student loans discharged between December 31, 2020 and before January 1, 2026. These loans were provided expressly for post-secondary educations expenses. The loan must have been provided by a governmental entity, private education provider, or educational institution at least 50% charitable.
Services may not have been performed in exchange for the discharge of the student loan (i.e. a student could not have worked for the university in exchange for discharged student loans).
Without this change, the student loans discharged in 2021 to 2025 would have been taxable to the recipient.
Affordable Care Act
The ARPA lowered, or even eliminated, health insurance premier for the ACA marketplace plans by preventing enrollees from paying more than 8.5% of their income for coverage.
The law also expanded existing premium tax credits for enrollees who earn up to 400% of the poverty level. This poverty level is determined at a local, not national level.
This is an entire article to itself. Please click here to read more on Child Tax Credits and Child Dependent Tax Credit changes.
This article is effective as of tax laws on March 18, 2021 and may not include subsequent tax law changes. Please consult a CPA at Delta Wealth CPA's & Advisors for tax guidance and advise.