Wolters Kluwer Examines the Tax Provisions of the American Rescue Plan Act
US House approves plan, now heads to US Senate
President Joe Biden is seeking to prioritize an emergency package of relief provisions for individuals and businesses continuing to suffer from the COVID-19 pandemic. On February 27, 2021, the US House of Representatives passed the American Rescue Plan Act, which now moves to the US Senate.
In many cases, the proposed tax provisions of the American Rescue Plan Act are extensions or expansions of existing tax law to provide some immediate assistance to individuals and businesses affected by the pandemic.
American Rescue Plan Act- key provisions
The provisions generally apply only for 2021 and include the following:
- Additional stimulus payments: providing economic stimulus payments of $1,400 that include both child and adult dependents, with a possibility for two rounds of payments; the first based on 2019 and the second based on 2020 tax return income
- Expanded Child Tax Credit: increasing the amount of the credit, extending the eligible age of children, making it fully refundable, and providing for monthly advance payments from the IRS
- Expanded Child and Dependent Care Credit: raising the dollar limit for the credit and for qualifying expenses, increasing the percentage of expenses used to calculate the credit, and raising the income limit for eligibility
- Expanded Earned Income Tax Credit: decreasing the minimum age, eliminating the maximum age, increasing the dollar and percentage limits, raising the investment income limit, and giving taxpayers the choice to use 2019 income rather than 2021 income
- Premium Tax Credits: increasing the premium tax credits under the Affordable Care Act for 2021 and 2022
- Paid Sick Leave and Family Leave: extending the credits to September 30, 2021, expanding what constitutes qualified leave, and a reset on qualifying days starting on March 31, 2021
- Employee Retention Credit: extending the credit to December 31, 2021
- Pension provisions: providing relief for single employer and multiemployer pension plans, extended amortization for single employer plans, and extension of pension funding stabilization percentages for single employer plans
- Worldwide interest allocation: repeal of the provision
Wolters Kluwer Tax Briefing: Wolters Kluwer Tax & Accounting published the 2021 American Rescue Act expert tax briefing that provides additional insights into the legislation passed by the US House of Representatives.
Providing needed guidance
Tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, can help discuss the House bill and the prognosis for enactment of the legislation.
PLEASE NOTE: The content of this alert has been prepared by Wolters Kluwer Tax & Accounting for general informational purposes only. The information is provided with the understanding that Wolters Kluwer Tax & Accounting is not engaged in rendering legal, accounting, or other professional services.
To arrange an interview with Mark Luscombe or other federal and state tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topics, please contact Bart Lipinski.