What Are Some Tax Implications of the American Rescue Plan?

On March 11, 2021, President Biden signed the American Rescue Plan into law.  The legislation had sweeping provisions designed to help the country pull itself out of the economic slump caused by the pandemic.  As you likely have heard, some of the key provisions of the American Rescue Plan included the extension of a $300 per week supplement to unemployment benefits for workers hurt most by the pandemic. 

In addition, the American Rescue Plan included a one-time $1,400 stimulus payment for Americans with income less than $75,000 annually; and it extended a 15% increase in food stamp benefits through September 2021.

There are, however, a number of tax provisions built into the American Rescue Plan that you may not have heard about.  Accordingly, in this article, we are going to discuss some of those important tax provisions, which will impact your 2021 taxes.  

If, after reading this article, you would like to discuss the American Rescue Plan as it relates to your own tax situation, we invite you to call the Sarasota tax attorneys at the Law Office of Mary E. King, P.L.  

The Law Office of Mary E. King, P.L. can make sure that your tax issues are resolved efficiently and at the lowest cost to you.  Please fill out our online contact form , or call us at 941-906-7585 today.

When it comes to tax changes under the American Rescue Plan, there are four major provisions worthy of discussion.  They are expansions of (1) the child tax credit; (2) the child and dependent care credit; (3) dependent care flexible spending accounts and (3) the earned income tax credit.  Let’s take a closer look at those:

1. Expanded Child Tax Credit

Before 2021, single people who earned less than $75,000 per year (or married couples who earned less than $150,000 per year) could claim a child tax credit of $2,000 for every child up to age 17.  With the American Rescue Plan, parents can now claim $3,000 per child age 6 through 17, and $3,600 for every child under age 6.  That is at least an extra $1,000 off of your taxes by virtue of the Plan.  

Moreover, the child tax credit used to be refundable up to $1,400 per child.  Well, the American Rescue Plan now makes the tax credit fully refundable.  That is good news for parents indeed.

2. Expanded Child and Dependent Care Credit

Prior to the Plan’s passage, taxpayers could claim credit for dependent care expenses up to 35%.  Also, the maximum credit families could claim for child and dependent care was $3,000 for one qualifying individual and $6,000 for two or more.  

The American Rescue Plan changes those substantially.  Now, taxpayers can claim a credit on 50% of eligible expenses.  Further, the ceiling on the credit jumped to $8,000 for one qualifying individual and $16,000 for two or more. 

3. Dependent Care FSAs

Workers used to be able to get a maximum of $5,000 in tax-free employer-provided dependent care benefits in a dependent care flexible spending account (FSA).  Yet, with the American Rescue Plan, that maximum amount doubled to $10,500.

4. Earned Income Tax Credit

For those workers and couples who do not have children, they may qualify for the Earned Income Tax Credit, which is a refundable tax benefit meant to help low- to moderate-income workers.  Fortunately, the American Rescue Plan essentially triples the EITC benefits.

Specifically, for the 2021 tax year, the maximum EITC is $1,502, up from $538 last year.  This change in the maximum is only for the tax year 2021.  

In addition, the EITC used to be only for people ages 25 to 64.  However, the American Rescue Plan now allows the EITC to be available to workers who are younger – at least 19 years old – and people who are older than 64 years old.

In sum, you may want to consider talking to a Sarasota tax attorney to understand how you can maximize the benefits of the American Rescue Plan on your 2021 taxes.  

The American Rescue Plan has many provisions that could help you when you start your 2021 taxes.  Let an experienced professional help. 

We invite you to reach out to the Law Offices of Mary E. King to help.  Tax matters can be complicated, and thus, it is always helpful to have someone in your corner who understands the tax law and deals with the IRS on a regular basis.  Indeed, beyond just the stimulus payment from the IRS, there could be other issues with which a seasoned tax attorney can help.  

So, when it comes to dealing with tax relief and tax litigation, you need to talk to a Sarasota tax law attorney who can help.  Mary E. King has spent her career concentrating in tax law and can help you with tax scams in Florida and elsewhere.  Attorney King has a wealth of information about what types of options would make the most sense for you and your business.

That helps explain why she’s received an A+ rating from the Florida Better Business Bureau. If you have a tax-related issue – no matter how small or how large – setting up an initial consultation with Mary E. King, tax lawyer of Florida, is the first step you should take towards relief.

The Law Office of Mary King P.L. offers complete IRS problem-solving services including all areas from tax debt settlement to planning the most efficient tax strategy for individuals and businesses.  Call us today to schedule an initial consultation.  With years of experience as a tax lawyer in Sarasota for many clients, Attorney Mary E. King can make sure that your tax issues are resolved in your favor.  Fill out our online contact form , or call us at 941-906-7585.   Remember, at the Law Office of Mary E. King, we are focused on solving your tax issues for good.

The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.