On March 11, President Biden signed into law the “American Rescue Plan Act,” to spark the recovery of the economy from the COVID pandemic. There’s a lot in the $1.9 trillion Act, but the changes described below are things you and your family should know about because they mean money in your pocket.
COBRA is the law that allows you to pay to continue your health plan when your employer no longer has to pay on your behalf. For most people laid off in the pandemic, COBRA was no help because they couldn’t afford to pay for it. The Act addresses that by allowing you to have COBRA coverage without paying for it for the months of April through September 2021 if, (1) you didn’t lose coverage because you quit; (2) you lost employer-paid coverage and remain eligible for COBRA as of April 2021 and the five months thereafter; and (3) you don’t have employer-paid coverage or Medicare now. If you lost your employer-paid coverage in your Union or employer health plan, you should receive an enrollment form for this free health coverage soon.
“Recovery rebate checks” of up to $1,400 ($2,800 for taxpayers married filing jointly), plus $1,400 for each qualifying dependent (which includes full-time students younger than 24 any adult dependents). The payments will begin to phase out for individuals with an adjusted gross income of $75,000 ($150,000 for couples) and completely phase out for taxpayers with an adjusted gross income of $80,000 ($160,000 for couples) or more.
MONEY OFF YOUR TAXES FOR TAX YEAR 2021
The “Earned Income Tax Credit,” a credit against what you would otherwise pay in federal taxes, will be much bigger. The tax credit (a “credit” means you deduct it from your federal tax bill) for federal taxes for adults without children goes from $543 to $1,502. The “Child Tax Credit” maximum amount increases to $3,000 per child ages 6 to 17 and to $3,600 for children under age 6. On top of the Child Tax Credit, the Act adds a tax credit for low- and middle-income families covering half of Child Care (or other dependent care) expenses, up to a maximum credit of $4,000 for one child or dependent and $8,000 for two or more children or dependents.
TAX-FREE UNEMPLOYMENT BENEFITS
Unemployment taxes are not subject to tax by California but are subject to federal taxes. The Act makes up to $10,200 in 2020 unemployment benefits federal tax-free per worker, for singles and families with incomes up to $150,000.
UNEMPLOYMENT BENEFITS WON’T RUN OUT
The Act extends unemployment benefits through September 6 -including self-employed workers, gig-economy workers, and people who have had to quit their jobs to care for their children during school closures, as well as the long-term unemployed. AND the $300 per-week supplement for anyone currently receiving unemployment benefits, which was also going to expire, is extended through September 6.