The American Rescue Plan Act (ARPA)

Individual Tax Provisions

• Eligible individuals will receive an income tax credit for 2021 equal to $1,400 for single filers, $2,800 for married filers, plus an additional $1,400 per dependent. This is a refundable credit which begins to phase out for taxpayers with adjusted gross incomes of over $150,000 for a joint return, $75,000 for single.

• Unemployment provisions included in the CARES Act passed in 2020 and further extended by the Consolidated Appropriations Act (CAA) in December 2020, which were set to expire on March 14, 2021 have been extended through September 5, 2021, including an extension of the $300/week federal supplement.
  • Additionally, the first $10,200 of these benefits will be tax-free for taxpayers making an adjusted gross income of less than $150,000.

• For tax year 2021 only, the definition of a qualifying child for the child tax credit has been broadened to include a child who hasn’t turned 18 by the end of 2021. In addition, the credit is increased from $2,000 to $3,000 per child ($3,600 for children under 6) subject to income phase outs. The credit is also fully refundable.

• The earned income tax credit (EITC) for low-wage workers who are not raising children in their home has been raised to $1,502 from $543.

• Under the ARPA, the child and dependent care credit has been increased from a maximum credit of $1,050 for one child and $2,100 for two or more children to the new limit of a $4,000 credit for one child and up to a maximum of $8,000 for two or more qualifying dependents.

• The ARPA will exclude federal student loan debt that is forgiven in 2021 through 2025 from gross income. It does not provide for further student loan forgiveness but new proposed legislation on the topic is expected in the future.