American Rescue Plan Act of 2021

The American Rescue Plan Act of 2021 that was signed into law on March 11, 2021 added more changes to an already confusing tax year. Following is a brief summary of some of the key provisions of the act. These provisions only affect your federal tax, many states still have not issued guidance on whether they will follow these changes.

Unemployment
The first $10,200 of unemployment compensation is non-taxable for 2020 if your modified adjusted gross income is $150,000 or less. At this time, the IRS is saying that if you filed your taxes early before this act was passed and had unemployment income do not file an amended return the IRS will adjust your return and issue any additional refund you are due.

Recovery Rebate – Stimulus Payment Round 3
Eligible individuals may qualify for up to $1,400 per taxpayer ($2,800 MFJ) plus $1,400 per dependent, the third stimulus is not limited to dependents under the age of 17 like the first two stimulus payments. The payment starts to phase out when AGI (Adjusted Gross Income) exceeds $75,000(single) and $150,000(MFJ) and phases out completely at $80,000 (single) and $160,000 (MFJ).

Premium Tax Credit
For 2020 only if you received an Advance Premium Tax Payment and it exceeds the Premium Tax Credit allowed you will not have to repay it when you file your tax return.

Child Tax Credit
For 2021 only the Child Tax Credit is increased to $3,000 per qualifying child ($3,600 for a qualifying child under 5 as of 12/31/21), the age limit is increased to 17 from 16 and the credit is fully refundable.  This increased credit phases out when AGI exceeds $75,000(single, MFS) $150,000 (MFJ) and $112,500 (HOH)

There are many more provisions to the act, this is just a brief highlight of the most important provisions that would affect the most taxpayers.