Many of the tax provisions in the American Rescue Plan Act of 2021 are extensions of existing provisions and are meant to provide immediate assistance to individuals and businesses affected by the COVID-19 pandemic. With the focus on the pandemic, provisions generally apply only for 2021 and include tax implications for taxpayers, as follows:
Additional Stimulus Payments
Provides economic stimulus payments of $1,400 that include both child and adult dependents, with a possibility for two rounds of payments; the first based on 2019 and the second based on 2020 tax return income.
Extends $300 per week additional unemployment benefits and making $10,200 of the benefits exempt from tax for 2020 tax returns.
Expanded Child Tax Credit
Increases the amount of the credit, extending the eligible age of children, making it fully refundable, and providing for advance payments as frequently as monthly from the IRS for 2021 only.
Expanded Child and Dependent Care Credit
Increases the dollar limit for the credit and for qualifying expenses, increasing the percentage of expenses used to calculate the credit, and increasing the income limit for eligibility for 2021 only.
Expanded Earned Income Tax Credit
Decreases the minimum age for childless individuals, eliminating the maximum age, increasing the dollar and percentage limits, increasing the investment income limit, and allowing taxpayers to choose to use 2019 rather than 2021 income.
Premium Tax Credits
Increases the premium tax credits under the Affordable Care Act for 2021 and 2022.
Student Loan Debt
Excludes forgiven student loan debt from taxation for loans discharged after 2020 and before 2026.
Employee Retention Credit
Extends the credit to December 31, 2021.
Paid Sick Leave and Family Leave
Extends the credits to September 30, 2021, expanding what constitutes qualified leave, and a reset on qualifying days starting on March 31, 2021.
Provides a 100 percent credit for employer payment of employee COBRA coverage.
Provides relief for single-employer and multiemployer pension plans, extended amortization for single-employer plans, and extension of pension funding stabilization percentages for single-employer plans
Worldwide Interest Allocation
Repeal of the provision.