The American Rescue Plan Act of 2021
States were allowed to change laws to provide COVID-19 unemployment benefits for those whose jobs were adversely affected by the pandemic. The American Rescue Plan Act of 2021 extended unemployment benefits and provided additional payments.
The Rescue Plan extends unemployment assistance from 50 weeks up to 73 weeks. Additionally, emergency unemployment compensation is extended from 24 to 53 weeks.
The Rescue Plan also temporarily authorized automatic, additional payments of $300 per week to those qualifying for unemployment benefits.
Extension of the CARES Act
The CARES Act unemployment provisions have been extended under the American Rescue Plan from March to September 6, 2021. The new CARES Act III includes extension of the Pandemic Unemployment Assistance (PUA) program for self-employed individuals or gig workers.
In most states, the PUA is separate from the regular Unemployment Insurance program.
What is Unemployment Insurance?
Unemployment Insurance provides unemployment benefits to eligible workers who became unemployed through no fault of their own. These benefits are usually in the form of weekly payments.
Is my state ending extra unemployment benefits?
However, many states are now ending their COVID-related unemployment benefits. Several states are ‘opting out’ of the extended federal unemployment benefits as early as June 2021. This includes the $300 extra that is available through September 6, 2021.
For the most up to date information, contact your state’s unemployment insurance program.
How do I file for unemployment benefits?
Each state administers their own Unemployment Insurance program. To receive updated information on how to file your claim for benefits, visit the individual state website.
Which state should I file in for benefits?
File your claim for unemployment benefits in the state where you worked. If you do not live in this state, then you can contact the state unemployment agency in the state where you live for information on how to file your claim with another state.
Do I pay tax on my unemployment benefits?
Your unemployment benefits must be reported as income on your federal and state tax returns. New laws enacted in 2021 that apply to 2020 only made the first $10,200 of benefits tax-free for those with AGIs less than $150,000.
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Do I need to register for work to be eligible to receive Unemployment Insurance?
States have different requirements when providing Unemployment Insurance. Some states have waived these requirements entirely. Visit your state’s Unemployment Insurance website and find their requirements on the COVID-19 or FAQ page.
State’s typically require up to a year of full-time work history to receive unemployment benefits. However, if you do not meet these requirements, you may still be eligible for benefits under the PUA program. The Pandemic Unemployment Assistance program allows states to provide benefits to those with shorter work histories.
Economic Impact Payments
To provide financial relief to working class families who have suffered under the COVID pandemic, the Rescue Plan is providing per-person checks sent out to households.
The American Rescue Plan is providing $1,400 Economic Impact Payments (also called stimulus payments) to individuals with an AGI (adjusted gross income) of $75,000 or less annually. For married couples with an AGI of $150,000 or less, $2,800 is available. This payment builds on the $600 provided in the second stimulus package – therefore, you can receive a total of $2,000 in payments as an individual.
Families will receive payments for all dependent children who are claimed on their tax returns; not just qualifying children under the age of 17.
Will I receive a stimulus payment if my AGI is over $75,000?
If you have an AGI over the thresholds, the stimulus payment available to you will be reduced until your AGI reaches the $80,000 mark as an individual, or $160,000 mark for couples. At this point you will receive nothing.
How else is the American Rescue Plan providing support?
Through the proposed policies of the $1.9 trillion Rescue Plan, President Biden aims to foster economic recovery and racial justice, and tackle child poverty. The Plan will support and provide assistance to small businesses, public healthcare, housing security, the funding of vaccinations, and struggling communities in the US.
The Rescue Plan further extends the Earned Income Tax Credit and the Child Tax Credit.
Earned Income Tax Credit
Biden has requested an extension of the Earned Income Tax Credit in order to help the lowest income workers, seeking to raise the limit for the credit for childless adults from roughly $530 to near to $1,500, and expand the eligible age and income bracket.
Child Tax Credit
The American Rescue Plan is expanding the Child Tax Credit in order to reduce child poverty. The credit has also been made available for children aged 17, whereas it was only previously available to children aged 16 and younger.
The amount of credit available has increased from:
- $2,000 to $3,600 for children under the age of 6
- $3,000 for children between the ages of 6 and 18
Those who are eligible to receive Child Tax Credit will now receive these payments in advance with periodic payments – families will not have to wait until the 2022 tax filing season to receive the benefits.
The credit is now fully refundable and has been extended to US territories.
Expiration of American Rescue Plan tax law changes
Several of the tax law changes implemented under the American Rescue Plan Act are set to expire at the end of 2021. This includes:
- The child tax credit it set to revert in 2022 to $2,000 per child under the age of 17. However, under the American Families Plan President Biden has proposed extending the increased credit through to 2025
- The child and dependent care tax credit was made refundable in 2021 for some taxpayers – in 2022 this credit is set to become non-refundable.
- The maximum credit for the child and dependent care tax credit for 2021 is $4,000 for one qualifying individual or $8,000 for two or more qualifying individuals – in 2022 the maximum is set to decrease to $1,050 for one qualifying individual and $2,100 for two or more.