Jo Willetts, EA
Director, Tax Resources
Published on: March 11, 2021
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A sweeping new COVID-19 economic relief package was signed into law by President Biden on March 11, 2021.
Known as the American Rescue Plan Act of 2021, the law includes a third round of Economic Impact Payments (EIP), or stimulus, as well as major changes to unemployment insurance and more.
Here are the main elements of the law that may have the biggest impact on taxpayers:
The IRS began issuing the third stimulus payments on March 12, 2021.
These payments are:
This means the following:
Eligible taxpayers will be able to claim the Recovery Rebate Credit on their 2021 tax return to reconcile any additional amounts they are owed as an EIP 3 (third stimulus) payment.
Beginning in tax year 2021(the taxes you file in 2022) the Child Tax Credit will be expanded. The bill increases the amount that families claiming the Child Tax Credit receive from $2,000 to:
The credit is now fully refundable – that means that you are eligible for the credit even if you don’t owe taxes.
Taxpayers who received unemployment benefits in 2020 are now eligible for different tax treatment of their unemployment benefits if their income is less than $150,000. The first $10,200 in unemployment income per taxpayer is tax-exempt.
Student loan payments forgiven are not included as taxable income. This allows for any executive order by the President to forgive all or part of student loans to be tax-exempt.
A host of other provisions are embedded in this massive law. You can read the entire bill here. We’ll continue to monitor for updates on how the IRS will implement many key elements of this legislation.
Got questions? Book an appointment with a Jackson Hewitt Tax Pro and they’ll be happy to help.
About the Author
Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 25 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.