Understanding the A merican R escue Plan Act of 2021 Presented by Jane Braun, CFP® On March 11, 2021, President Biden signed the American Rescue
dependent children, or other dependent family members living
Plan Act of 2021 (“the Act”) into law, with large portions of the bill
with them, will now see an enhanced payment amount.
acting as an economic stimulus for individuals and businesses
Taxpayers with adjusted gross income (AGI) above established
affected by the COVID-19 pandemic. At $1.9 trillion in total
thresholds will see their eligibility for a payment phase out more
expenditures, the bill contains provisions pertaining to a variety
quickly than under previous legislation. Regardless of the number
of areas. This summary is intended to address only the critical
of dependents, taxpayers with income that exceeds the upper
provisions for individuals and small businesses.
phaseout threshold will not receive a payment at all. For those
Direct Payments to Individuals
taxpayers within the phaseout range, their stimulus payment can be determined using the following formula:
Much like the previous two coronavirus-related stimulus actions,
(AGI – applicable threshold) / (upper phaseout threshold –
individuals and families with incomes below certain thresholds
applicable threshold)
can expect to receive a stimulus check (or direct deposit) from the For example, a married couple filing jointly with three dependents
government. Filing Status
Adjusted Gross Income (AGI) Less than...
Payment Amount
Complete Phaseout at AGI of More Than...
Individual $75,000 $1,400 $80,000 Head of Household $112,500 $1,400 $120,000 Married Filing Jointly $150,000 $2,800 $1600,000
and an AGI of $155,000 would be eligible for a base stimulus of $7,000: $2800 + (3 * $1,400). They can calculate their reduction as follows: ($155,000 – $150,000) / ($160,000 – $150,000) = 50 percent of their base stimulus amount of $7,000, for a total stimulus of $3,500.
In addition, families will receive an extra $1,400 per dependent. The term “dependent” is an important change in this legislation,
The determination of income will be based on taxpayers’ 2019
as previous stimulus funds were only applicable to taxpayers
income tax return. If individuals would be entitled to a higher
with children younger than 17. Accordingly, taxpayers with older
payment if 2020 AGI figures were used, they can file their return
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