By now, we are all pretty familiar with the American Rescue Plan Act of 2021, President Biden’s first stimulus package. Many of you may have received your stimulus checks already. There are a few points that are common knowledge about the act; it weighs in at $1.9 trillion in aid, it’s meant to help keep the recovery going, and it is a mix of economic help and strategies to fight the virus. However, do you know every detail that might affect you? I didn’t, so chances are you are in the same boat as my wife and I were.
I thought it would be an excellent time to reach out with a summary of “just the facts,” as they say, to make sure you are aware of what is in the Act and how you may or may not be affected. So, here goes!
Direct Financial Payments
OK, so let’s start with a couple of points that may be familiar. We know we are all getting $1,400 in stimulus payments if we make $75,000 or less a year. You may also know that Unemployment Assistance and Federal Pandemic Unemployment Compensation, both at $300 a month, will now be given through September 6, 2021.
However, this might be news to you; the first $10,200 in 2020 benefits from the three Acts passed so far will be tax-free if your family makes $150,000 or less. The Act will also provide 100% COBRA subsidies for unemployed workers with healthcare plans through their former employers.
Housing Moratoriums and Increased Financial Assistance
Unfortunately, the current eviction and foreclosure moratorium was not extended, so that ended on March 31st. However, additional funding will provide relief if you are behind on your mortgage, rent, or utility bills.
The good news here is that the Act extends the 15% increase in the Supplemental Nutrition Assistance Program (SNAP) benefits through Sept. 30, 2021. On top of that, the Pandemic Electronic Benefits Transfer program is now extended through any school year or summer period following a designated public health emergency. Now, while you may not need these services, I believe the information is worth sharing in case you know people who do need to know about these measures.
Expanded Child Tax Credit
In more good news, the Act increased the Child Tax Credit to a maximum of $3,000 per year per child ages 6-17 and $3,600 for children under six. This applies to couples making $150,000 or less and single parents making $112,500 or less. These payments will be sent by direct deposit on a monthly basis. Basically, this means that a family with one child under six would get $300 a month and $250 a month for any children between 6-17. The reason is that Congress felt it would help more for families to have more money each month rather than just getting to claim a credit at tax time.
Student Loan Forgiveness (Tax-Free)
While the President didn’t get to include student loan forgiveness in this round of stimulus, it is definitely on his mind because the Act includes a provision that any student loan forgiveness passed between December 30, 2020, and January 1, 2026, will be tax-free. This is great because typically, loan forgiveness is treated as taxable income as if they are giving you your money back, which we all know isn’t happening!
Schools and Childcare Block Grants
The Act also includes some very good news for schools as it allocated $130 billion for k-12 education. The Act specifies that the money is to be used to reduce class sizes, improve air quality through ventilation, purchase protective gear, and other measures to keep schools open. About $40 billion of that money would go to colleges and universities to provide emergency financial aid grants. Another $40 billion is allocated for childcare provided through the Child Care and Development Block Grant program. On top of that, $1 billion is dedicated to the Head Start program.
Help for Businesses
Restaurants and bars got a boost from the Act with $25 billion in pandemic aid in the form of grants. Each grant can provide up to $10 million per restaurant/bar and help cover things like payroll, rent, utilities, etc...
The Act continues to provide aid for other businesses in the form of the PPP or Paycheck Protection Program, and an additional $7.25 billion has been allocated to that program. Additionally, they are allowing more non-profits to apply for forgivable loans. The only negative news there is that the application deadline for PPP wasn’t extended and ended yesterday.
The Act gave $50 billion towards continued progress on COVID testing, contact-tracing, and vaccine distribution. Approximately $19 billion will go to hiring public health workers, and another $16 billion will fund vaccine distribution. About $46 billion will go towards expanding vaccine distribution, testing, and mobile labs.
State and Local Government
In order to continue to help state and local governments replace lost tax revenue, the Act will provide $350 billion in aid to states, cities, tribal governments, and U.S. territories. Analysis by the Washington Post found that a majority (26) of states experienced revenue declines between Dec. 2019 and Dec. 2020
Well, there you have it, folks, the 30,0000 foot summary of the American Rescue Plan Act. I hope this was helpful, and please feel free to pass it along to anyone you know that might need it or be confused by all the “governmental speak” surrounding the Act. As always, I am just a phone call away. Have a wonderful week, and stay safe out there.