On March 11, 2021, the one-year anniversary of the COVID-19 pandemic, President Biden signed into law the $1.9 trillion American Rescue Plan Act of 2021 (the Act). This act provides much-anticipated relief measures for those most affected by the pandemic. Our tax advisors lay out some of the key relief opportunities for individuals and businesses.

Impact on Individuals

Numerous relief provisions for individuals are included in the Act. Many of these relief measures are limited based on your income. Here are a few of the key opportunities for individuals.

Another round of stimulus relief will be provided and there again are income thresholds to determine the amount individuals receive. Direct payments of $1,400 will be made to individual filers making up to $75,000 and up to $150,000 for married couples. Those with income above those levels will receive a stimulus payment at a reduced rate based on a phased schedule.

Child Tax Credit Increase

The Child Tax Credit has received a significant, but temporary, increase for 2021 only. For children under 6 years old it will be $3,600 per child and for between 6 and 17 years old it will be $3,000. Income limitations apply.

Unemployment Benefits Tax-Free

Unemployment benefits will not be taxed on a federal level for the first $10,200 received for individuals or households under a $150,000 income threshold. The State of Minnesota is voting on this measure soon and we will keep you informed.

COBRA Premium Subsidy

Individuals and families who have lost employer-provided health insurance due to layoffs or reduced hours and are on COBRA will have their entire premium paid by the federal government for April through September. Eligibility requirements apply.

Impact on Businesses

While the relief measure focused on individuals, businesses also received some relief through the passing of the Act.

Restaurant Revitalization Grants

Grants are available for restaurants and other food businesses to help with payroll costs, mortgage or rent payments, utilities, supplies, operational expenses, and more. Eligible entities include restaurants, other specified food businesses and include those operating in an airport terminal. Eligibility limitations apply.

Flexible Spending Account Contribution Increase

Contributions limits for flexible spending accounts have been increased from $5,000 to $10,500 for 2021. In order to allow for additional contributions to FSA accounts, businesses must amend their cafeteria plan for 2021 only.

There are many provisions included in the American Rescue Plan Act of 2021 for individuals and organizations. It’s important to consult with your tax advisor about these relief measures and the tax and business implications to you.

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Visit our COVID-19 Resource Center to find resources for businesses, government, nonprofits and individuals. If you have questions or need assistance, contact one of our advisors.

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