The latest COVID-19 relief package provides $1.9 trillion in mandatory funding, program changes and tax policies aimed at mitigating the continuing effects of the pandemic.

The Brief summary of key tax provisions included in the American Rescue Plan Act of 2021, signed into law March 11, 2021, affecting 2021.

Stimulus Payments

Eligible individuals may qualify for a 2021 rebate amount of up to $1,400 per taxpayer ($2,800 MFJ), plus $1,400 per dependent.

This is treated as a Recovery Rebate Credit on your 2021 tax return.

Any stimulus payment received now reduces the Recovery Rebate (but not below zero) that may be claimed on your 2021 tax return.

This stimulus payment for dependents is not limited to dependents who are under age 17. This stimulus payment may not be paid, per individual, more than once.

The payment starts to phase out when AGI exceeds $75,000 (Single, MFS), $150,000 (MFJ, QW), and $112,500 (HOH) and is fully phased out at $80,000 (Single, MFS), $160,000 (MFJ, QW), and $120,000 (HOH)

Child Tax Credit

Effective for 2021 only, the Child Tax Credit (CTC):

• Is increased to $3,000 per qualifying child,
• Is $3,600 in the case of a qualifying child age Six or younger as of December 31, 2021,
• Age limitation is increased from age 16 to age 17,
• Is fully refundable.

Phase-out. The increased CTC (over the $2,000 prior amount) phases out when modified AGI exceeds $75,000 (Single, MFS), $150,000 (MFJ, QW), and $112,500 (HOH).

Expanded Unemployment Benefits

Extends the Pandemic Unemployment Assistance program through Sept. 6, 2021, while increasing the total number of weeks of benefits available to individuals who are not able to return to work from 50 to 79 weeks.

Extends the Federal Pandemic Unemployment Compensation (FPUC) through Sept. 6, 2021, while maintaining benefit amount of $300. Exempts the first $10,200 in 2020 unemployment benefits from federal income tax for households with incomes below $150,000 per year.

Earned Income Tax Credit

Raises the maximum Earned Income Tax Credit (EITC) for adults without children from $543 to $1,502. It would also lower the age eligibility for the childless EITC from 25 to 19 and eliminate the upper age limit, which currently bars the credit for childless people age 65 and older. Other changes include eliminating a rule that bars individuals who have children without Social Security numbers from claiming the childless EITC and allowing individuals who are separated from their spouses to claim the EITC on a separate return if they live with their child for more than half of the year.

Dependent Care

Temporarily increases the value of the child and dependent care tax credit, which currently covers 35% of care expenses up to $3,000 for one dependent or $6,000 for two or more dependents. The measure would make the credit refundable, increases the maximum allowable expenses to $8,000 for one dependent and $16,000 for two or more, and allows the credit to cover 50% of expenses.

Premium Tax Credit

The ARP includes a broad expansion of the Affordable Care Act’s (ACA) main health insurance subsidy, the premium tax credit (PTC), the first major expansion of the health care reform law since its passage. The provision increases the amount of the PTC for those who are eligible and makes individuals with incomes above 400 percent of the federal poverty line (FPL) eligible for the first time. The expansion is temporary, lasting only through the 2022 plan year.