The $1.9 trillion stimulus package enacted this week means some significant cash is headed to many millions of bank accounts across the country: stimulus checks worth up to $1,400 per taxpayer (and $1,400 per dependent,) a $300 weekly unemployment supplement for another five-plus months, and a bigger child tax credit (up to $3,600), now doled out monthly.
The American Rescue Plan, based heavily on a proposal of the same name put forward by President Joe Biden, is meant to sustain hard-hit individuals and the broader economy through what politicians hope are the final days of the COVID-19 pandemic. Passed with a House vote of 220-211 Wednesday, it was signed into law by President Joe Biden on Thursday, just days before unemployment benefits would have again expired for millions.
“This historic legislation is about rebuilding the backbone of this country, and giving people in this nation—working people, middle class folks, the people who built the country—a fighting chance,” Biden said just before signing the bill.
Here’s how your pocketbook could be directly affected.
Highlights of the American Rescue Plan
- Eligible households will get the biggest pandemic stimulus checks yet: Checks of $1,400, plus another $1,400 per dependent, will go to taxpayers making less than $75,000 (or $150,000 for married couples who file jointly.) People making up to $80,000 ($160,000 for couples) will get a reduced payment. Check amounts will be based on 2020 or 2019 tax returns, depending on which have been filed.
- Extra unemployment benefits will last longer: Those collecting unemployment insurance will continue to get $300 extra per week through a federal supplement program that now ends on Sept. 6 rather than March 14.
- Two programs that cast a wider net on traditional unemployment benefits have been extended: The Pandemic Unemployment Assistance (PUA) program, which supplies unemployment benefits to self-employed workers, independent contractors, and others who are normally ineligible to receive them, now ends Sept. 6 rather than March 14. The Pandemic Emergency Unemployment Compensation (PEUC) program, which lengthens unemployment benefits for those who would otherwise run out, has also been extended for the same period.
- Unemployment insurance recipients will get a tax break: The first $10,200 of unemployment benefits received in 2020 won’t be taxed for households making under $150,000, limiting surprise tax bills for people who lost their jobs in the pandemic. Assuming a 10% tax rate, this benefit could save taxpayers as much as $1,020, though those who have already filed their 2020 taxes may need to refile to take advantage of it.
- The Child Tax Credit has been increased and will be distributed in monthly installments: Depending on income, parents will get a tax credit of up to $3,000 per child 6 to 17 and $3,600 per child 5 and under. Previously the maximum was $2,000. Perhaps more importantly, the new credit will be distributed as monthly checks instead of being applied at tax time, with the first payments for the 2021 tax year scheduled to go out this July. For example, a household with a two-year-old would receive $300 a month.
- More people are eligible for the Earned Income Tax Credit next year: This tax credit for lower-income workers now covers more than 17 million people under 25 who do not have children by reducing the minimum eligibility age for those without children to 19 from 25. Also, the maximum credit for childless workers will nearly triple to $1,502 from $543. The changes will affect the 2021 tax year.
- Emergency aid for schools and state and local governments: $350 billion for state, local, territorial, and tribal governments, over $125 billion for public schools (Kindergarten through 12th grade) and about $40 billion for colleges and universities.
- Aid for childcare: $39 billion to support childcare programs, including for the children of essential workers.
- Emergency rental assistance: $21.6 billion in aid to help people pay overdue rent and utility bills .
- Direct assistance to homeowners: Nearly $10 billion to housing entities to help pay mortgages and utility bills.
- Relief for hard-hit businesses: This includes $28.6 billion for the restaurant industry alone.