The American Rescue Plan Act, recently passed by Congress, has now been signed into law. While the act has many provisions that address a wide range of topics, we wanted to provide you with a brief overview of several tax provisions applicable to individuals.
The act provides for a new third round of Economic Impact Payments (“stimulus payments”) for qualifying individuals. As with the first two rounds of payments, these will be structured as advanced payments of the Recovery Rebate Credit. The amount of the Economic Impact Payments will be calculated based on the following criteria:
- Eligible individuals will receive a payment of up to $1,400, or $2,800 for married couples, plus an additional $1,400 for each dependent.
- The payments will begin to phase-out for those with income exceeding the following amounts:
- $75,000 for single filers
- $150,000 for married couples filing jointly
- The payments will completely phase-out for single filers with income exceeding $80,000 and joint filers with income exceeding $160,000
The IRS is expected to begin sending payments in the coming weeks and will use 2019 AGI to determine eligibility unless your 2020 tax return has already been filed.
The act makes the first $10,200 of unemployment benefits received in 2020 tax-free for all individuals with less than $150,000 of income.
Increased Tax Credits for 2021
The act also includes temporary taxpayer-friendly changes and increases for 2021 to the Child Tax Credit, Child and Dependent Care Credit, and the Premium Tax Credit.
We are considering the impact of these provisions for all our clients on an individual basis and are awaiting further guidance from the IRS regarding some of the provisions. For many of our clients, this may mean that we will be waiting to file your tax returns until further guidance is issued by the IRS. If Windward prepares your tax returns, we will be communicating our recommendation for the most beneficial course of action for your individual circumstances. If you have any questions about your personal income tax situation, please contact us.
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