The American Rescue Plan Act Has Passed: Here's an Overview of the $1.9 Trillion Stimulus Plan
About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual Fiduciary Financial Planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.
In one of his first major moves in office, President Biden has signed the American Rescue Plan Act - a $1.9 trillion stimulus plan meant to extend, renew and implement relief for those affected by COVID-19.
Below is a breakdown of some important components of this legislation, including what business owners, families, and struggling individuals may need to know.
Unemployment Benefits
Eligible unemployed individuals may continue receiving an additional $300 in federal unemployment benefits through early September 2021.1
Small Businesses & The PPP
Overall, the bill allocates around $50 billion toward assisting small businesses affected by COVID-19.1
The Paycheck Protection Program will receive $7.25 billion, but the new legislation does not change the PPP’s end date of March 31, 2021.1 Bars, restaurants and entertainment venues heavily impacted by the pandemic will also be eligible to receive grants from the government.
Low-income communities have been some of the hardest hit financially during the pandemic. In response, the government will be allocating $15 billion toward Economic Injury Disaster Loan (EIDL) Advanced Grants. Eligible businesses in low-income communities may be able to receive up to $10,000 each.1
Employee Retention Credit
The Employee Retention Credit (ERC) will be extended through the end of 2021. With this refundable tax credit, business owners may claim up to $7,000 per employee per quarter.1
Stimulus Checks
Similar to previous relief bills, eligible American taxpayers will be receiving direct stimulus payments of $1,400 as part of the new bill. Similar to previous checks, those with incomes up to $75,000 will receive $1,400 payments, while families with children will receive $1,400 per dependent. Married couples with an income of $150,000 or less will receive $2,800.1
There will be a phase-out and income cap for individuals and couples who make more. Individuals earning between $75,000 and $80,000 will receive a lesser amount, with those making above $80,000 receiving no stimulus payment. The same applies for couples earning between $150,000 and $200,000 - with $200,000 being the cap.1
Child Tax Credit
Previously, the child tax credit offered eligible families a $2,000 tax credit per child under the age of 17. With changes made under the new legislation, the child tax credit is temporarily expanding for 2021. Eligible families may receive up to $3,600 for children 5 and under and up to $3,000 for children ages six to 17.1
Here is how the American Rescue Plan is changing conditions and stipulations regarding the child tax credit:1
- The $2,500 earning floor will be waived.
- The credit will be fully refundable.
- The federal government will send eligible families credit in advance between July and December 2021.
COVID-19 Vaccination Distribution & Testing
Similar to previous legislation, a portion of the American Rescue Plan will designate funding for COVID relief. Around $15.05 billion will go toward vaccine production and distribution, while $50.8 billion will go towards testing, contact tracing, genome sequencing, and global health response initiatives.1
The Federal Emergency Management Agency will receive a portion of the funds as well.
State & Local Government Assistance
States, tribal governments, and cities will receive $350 billion in federal assistance.
In addition, this legislation includes a $10 billion infrastructure program to help local government continue capital projects.1
FEMA Emergency Food and Shelter Program
FEMA’s Emergency Food and Shelter Program will receive $510 million to support initiatives for homeless and struggling families including:1
- Shelter and meals
- One month’s rent
- Mortgage assistance
- One month’s utility payments
Wondering how this recent legislation and other COVID-relief initiatives may benefit you? Your trusted financial professional can offer additional assistance and insight as we all continue to combat the economic instability caused by COVID-19.
Dream Financial Planning Process ™
Whether you're managing student loan debt, starting a family, or considering buying your first home, the DREAM Financial Planning Process™ is tailored to the unique needs of busy professionals in their 30s and 40s. This process focuses more on short-term goals while you grow and evolve in your personal and professional life. If you're looking for guidance on Financial Planning, optimizing employee benefits, budgeting, student loans, and managing your 401k or investments, we can help.
Complimentary Consultation
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.
Monthly Newsletter
If you're looking to buy your first home, you'll want to read this month's Newsletter. In my February Newsletter, I discuss how student loans could affect your ability to buy a home with Megan Leonhardt of CNBC. There are also blog posts that discuss 7 Tax Deductions For The Self Employed and 4 Common Mistakes Made by First Time Homebuyers.
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