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Astoria Strategic Wealth

The American Rescue Plan Act of 2021

American Rescue Plan Act of 2021

This week President Joe Biden signed into law the $1.9 Trillion American Rescue Plan Act of 2021 (ARPA).  This is the third major COVID recovery bill passed and is designed to include support for individuals, businesses, state and local governments, schools, agriculture, as well as access to additional testing and vaccinations.  Below are some of the most publicized provisions of the ARPA.        

  • Stimulus Payments
    • Like the two previous two COVID-related bills, ARPA includes direct payments to individuals.  Most notably, though, the payment amount is higher, but the income phaseout amounts occur sooner.  The direct payment checks are $1,400 for each individual AND for each qualifying dependent (includes full time students and adult dependents).  The phaseout amounts, though, begin at $75,000 for individual filers and $150,000 for joint filers with very narrow complete phaseout amounts at $80,000/individual and $160,000/married.
    • The phaseout amounts are based on the most recent tax return filed (i.e., 2020 or 2019) but are technically a 2021 tax return credit.  If one’s AGI is below the phaseout limit in 2020 or 2019, then they will receive the full credit.  Importantly, if one’s 2021 AGI is ABOVE the phaseout limit but were below as of their last filing, there is no ‘claw-back’ of funds received (i.e., updated tax returns can only increase your payment amount – not decrease).  
  • Child Tax Credits
    • The child tax credit was increased from $2,000 per child to $3,000 ($3,600 for children under 6) for those making less than $75,000 (individuals) and $150,000 (married).  For filers making more than the phaseouts mentioned above, there remains a $2,000 per child credit if your AGI is below $200,000 (individuals) or $400,000 (married).  In addition, there is a ‘pre-payment’ of this tax credit for those that qualify ($75,000 individual / $150,000/married) which will distribute the credit in equal amounts from July to December.  
  • Unemployment Benefits
    • Unemployment benefits were extended through September 6, 2021.  The first $10,200 is not taxable for those with an AGI less than $150,000.  Anyone above this limit will have their benefit taxed. 
  • Student Loan Forgiveness
    • Student loans that are forgiven between the years 2021-2026 will not count as income. 
  • Notable Omissions
    • RMDs
      • The popular RMD exemption of 2020 did not make it into this bill.  So, we expect to resume our normally scheduled RMDs for calendar year 2021.
    • Minimum Wage
      • The widely debated minimum wage increase of $15/hr. also did not make it into this bill.

While this bill will take some time to digest given its extensive provisions, the most apparent planning opportunity revolves around the $75,000 individual and $150,000 married thresholds.  Numerous provisions include these numbers and the phaseout amounts are very narrow (e.g., you get 100% of the benefit if you make $149,999 and 0% at $160,000).  As always, we will work in coordination with your tax advisor to plan around these and any future opportunities.