On Thursday, March 11, President Biden signed the American Rescue Plan Act into law. The new stimulus will inject our economy with $1.9 trillion to help families, individuals, and businesses that continue to be impacted by the COVID-19 pandemic. The American Rescue Plan includes funding for the popular Paycheck Protection Program, direct stimulus payments, unemployment benefits, and more.
Paycheck Protection Program and Small Business Assistance
The American Rescue Plan adds $7.25 billion to the Paycheck Protection Program (PPP) and plans to expand loan eligibility and provide funds to more nonprofit organizations.
While this sounds promising, the new legislation does not extend the March 31, 2021 deadline when the PPP expires. The Small Business Administration is currently facing a backlog of yet-to-be-approved PPP applications. Under current rules, any loan that is not approved by the March 31st deadline will not be funded.
However, Lisa Simpson, CPA, and the AICPA’s vice president of Firm Services, testified before Congress on Wednesday, March, 10th to extend the PPP application deadline by at least 60 days.
The plan also provides $25 billion in pandemic assistance grants. These grants can provide up to $10 million per company with a limit of $5 million per physical location to cover payroll, rent, utilities, and other expenses.
Direct Stimulus Payments
The plan will provide $1,400 in stimulus payments to people making $75,000(AGI) or less annually. Couples earning $150,000(AGI) annually or less will receive $2,800 for their stimulus payment.
Unlike the previous rounds of stimulus payments, payments will be entirely phased out for individuals earning more than $80,000 or couples earning more than $160,000. These income amounts are based on your tax return. If you fall somewhere in between, it may be best to wait to file your 2020 taxes (just make sure that you submit everything by April 15, 2021).
Child Tax Credit
The Child Tax Credit maximum is increased to $3,600 per year for children under 6 ($300 per month) and $3,000 per year for each child between the ages of 6 and 17 ($250 per month). To qualify, couples must earn $150,000 or less, and single parents must earn $112,500 or less. The fully refundable tax credit will be paid monthly for one year to help parents pay the ongoing costs of caring for their children.
The Pandemic Unemployment Assistance (PUA) extends the current $300 per week federal unemployment benefit through September 6, 2021 and increases the total number of weeks available from 50 to 79.
There is also an additional tax benefit. The first $10,200 received in unemployment benefits will be tax-free for families making $150,000 or less. Individuals who had taxes withheld from unemployment benefits in 2020 will also be able to claim them back when they file their 2020 tax return or submit an amended tax return if they have already filed. There will also be a 100% subsidy of COBRA health insurance premiums to allow individuals to stay on their employer’s healthcare plans until the end of September.
Rental and Foreclosure Moratorium
The existing rental and foreclosure moratoriums will not be extended past their current March 31 deadline. However, the plan will provide the following assistance to those struggling with housing costs:
- $21.55 billion for emergency rental assistance through September 30, 2027
- $5 billion in emergency housing vouchers through September 30, 2030
- $750 million for tribal housing
- $100 million for rural housing
- $5 billion to assist people experiencing homelessness
State and Local Government Assistance
The plan adds $350 billion to help states, cities, tribal governments, and U.S. territories by replacing lost tax revenue due to the COVID-19 pandemic.
COVID-19 Pandemic Response
- $7.5 billion for the CDC to track, administer and distribute COVID-19 vaccines
- $46 billion toward diagnosing and tracing COVID-19 infections
- $2 billion for the purchasing and distribution of testing supplies and PPE
Student Loan Forgiveness
The Rescue America Plan does not include any student loan forgiveness. However, it does have a provision that will make any student loan forgiveness passed between December 30, 2020, and January 1, 2026 tax-free.
Education and Childcare
There is $130 billion set aside to help schools reduce class size, improve ventilation, purchase personal protective equipment (PPE), and help them reopen safely.
$40 billion will go to higher education colleges and universities to provide emergency financial aid grants for students.
$40 billion will go to childcare providers through the Child Care and Development Block Program. There is also $1 billion included for the Head Start program.
We’re All In
If you have any questions about the new stimulus, how these changes may impact you, or anything else, we’re here for you. You can contact us by filling out the form below or call us at (410) 363-7211.
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