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What the American Rescue Plan means for you and a third stimulus check

March 11: The American Rescue Plan was signed into law on March 11th. The plan includes a third round of stimulus payments for millions of people. In addition, the bill also extends certain unemployment benefits and expands tax relief for unemployment benefits, the Child Tax Credit, and the federal Earned Income Tax Credit (EITC).

Here is what you need to know:

Third Stimulus Payments for Individuals and Joint Taxpayers

Those eligible will get up to $1,400 in stimulus payments for each taxpayer in their family plus an additional $1,400 per dependent. This means a family with two children could receive $5,600.

Unlike the previous two rounds, you will receive stimulus payments for all your dependents, including adult dependents and college students.

Although you may want to file your 2020 return now in order to provide your most recent information to the IRS, including bank account information, you don’t need to do anything to get your stimulus check. The IRS will determine eligibility based on your last tax return, either 2019 or 2020, and will likely send your payment to the bank account where your tax refund was deposited.

So, how do you know if you may be eligible to receive a third stimulus payment?

If you have an adjusted gross income (AGI) of up to $75,000 ($150,000 married filing jointly), you should be eligible for the full $1400 stimulus payment.

*Note, adjusted gross income (AGI) is your gross income like wages, salaries, or interest minus adjustments for eligible deductions like student loan interest or your IRA deduction. Your AGI can be found on line 8b of your 2019 Form 1040 or on line 11 of your 2020 Form 1040.

As your AGI increases over $75,000 ($150,000 married filing jointly), the stimulus amount will go down. The stimulus check rebate will completely phase out at $80,000 for single filers with no qualifying dependents and $160,000 for those married filing jointly with no dependents.

Once again, mixed-status households (households with different immigration and citizenship statuses) will be eligible for stimulus payments.

Expanded Unemployment and Retroactive Tax Relief

Unemployment payments will increase by $300 per week and the benefits will be extended through September 6, 2021.

The bill extends the Pandemic Unemployment Assistance (PUA), which expands unemployment to those who are not usually eligible for regular unemployment insurance benefits. This means that self-employed, freelancers, and side giggers will continue to be eligible for unemployment benefits.

The bill also makes the first $10,200 of unemployment income tax-free for households with income less than $150,000. This provision would be retroactive to tax year 2020 (the taxes you file in 2021).

Expansion of Credits for Children of Workers

The American Rescue Plan also includes an expansion of tax credits for lower-income workers with kids.

Enhanced Earned Income Tax Credit

Beginning next year, the Federal Earned Income Tax Credit has been expanded for workers without kids and nearly triples the maximum credit. Eligibility is also extended for a wider range of filers, now allowing taxpayers to qualify who are over 65 or between the ages of 19-25.

Expanded Child Tax Credit

Beginning in tax year 2021(the taxes you file in 2022) the Child Tax Credit will be expanded. The bill increases the amount that families claiming the Child Tax Credit receive from $2,000 to:

  • $3,600 for each child under 6
  • $3,000 for each child age 6-17

The credit is now fully refundable – that means that you are eligible for the credit even if you don’t owe taxes.

Although this credit is for next year’s tax filings, payments will also be sent in advance, over the course of the year, beginning no earlier than July 2021 so people don’t have to wait to file their  2021 taxes. The IRS will likely determine eligibility based on your most recent tax filing.

March 10: The American Rescue Plan passed the House today. The legislation still includes a $1,400 stimulus check for eligible Americans, expanded unemployment, and tax relief on unemployment benefits for households making under $150,000. The legislation will now go back to the President to be signed into law and we anticipate this will happen on Friday.

March 6: The American Rescue Plan passed the Senate today. As it stands today, the legislation agreement includes a $1,400 stimulus check for eligible Americans, expanded unemployment, and tax relief on unemployment benefits for households making under $150,000. The amended legislation will now go back to the House for passage before being sent to the President to be signed into law.

February 27: The COVID Relief legislation, known as the American Rescue Plan, passed the House of Representatives and has been sent to the Senate for discussion and voting. As it stands today, the legislation includes a $1400 stimulus check for eligible Americans and further tax relief through an expanded Child Tax Credit and Earned Income Tax Credit.

February 16:  In January, President Biden proposed a $1.9 Trillion emergency coronavirus relief plan, called the American Rescue Plan. As it stands today, the plan includes a third direct stimulus payment, expanded unemployment, and the expansion of tax credits for families with kids.

President Biden has said that the American Rescue Plan is a priority for him and things are evolving quickly. We know how important these funds are to you, but no new law has been passed, yet, authorizing these payments.

The bill is currently working through Congress, where changes could be made prior to a vote. If the House of Representatives passes the plan, it will then go to the Senate for discussion and voting and then to the President for signature.

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