Key Points from Biden’s American Rescue Plan

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On January 20, 2021, President Joe Biden announced his plan for a new COVID-19 relief package. A $1.9 trillion relief plan named the American Rescue Plan. The plan provides resources for fighting the pandemic along with economic relief for both individuals and businesses. Below are the parts of the plan that may impact you if the plan is turned into law.

Stimulus Payments for Individuals & Families

A $1,400 direct payment to individuals and $2,800 to families. Both the amounts and thresholds are in negotiation, so it is too soon to tell what the final amount to Americans will be, who will be eligible for it, and when they might get it.

Child & Family Tax Credits

The plan proposes increasing the maximum child tax credit to $3,600 per child under the age of 6 and $3000 per child ages 6-17. The refundable tax credit would be available to all families regardless of income.

The plan also proposes expanding the Child and Dependent Care Tax Credit to cover half of childcare costs up to $4,000 for one child or $8,000 for two or more. As currently proposed, the refundable credit would be fully available to families making less than $125,000 and partially available for those earning between $125,000 and $400,000.

Earned Income Tax Credit

The plan also includes an increase to the Earned Income Tax Credit in 2021 only. President Biden’s plan would raise the maximum credit to almost $1,500, raise the income limit to about $21,000, and allow older workers to claim the credit.

Employee Compensation

The plan would increase the Federal Pandemic Unemployment Compensation from $300 to $400. Also, workers would qualify for the expanded federal benefits through September 2021.

His plan would also expand paid sick and family medical leave through September 30, 2021. The expanded leave would include a maximum paid leave benefit of $1,400 per week for eligible workers—up to a full wage replacement of up to $73,000 annually. The plan requires employers to provide leave policies with these specifics and eliminate exemptions that existed under the first round of paid sick and family leave.

Lastly, as part of the plan, the minimum wage would be increased to $15 an hour.

Relief for Small Businesses

President Biden’s plan would provide $15 billion in grants to help small businesses recover from the pandemic.

The plan extends the refundable tax credit for employee paid sick and family medical leave through September 30, 2021. The extended tax credit would cover 100 percent of the cost of the new policies for employers with less than 500 employees.

To see how these proposed changes could affect your unique tax situation, contact us. For more information about President Biden’s expanded proposed tax law changes as promised on the campaign trail, read our latest article, What Biden Might Mean for Taxes.