SUMMARY: As the COVID-19 pandemic enters its 2nd year, President Biden has begun to outline details of the "American Rescue Plan," a $1.9 trillion relief plan designed to help stem the coronavirus pandemic. What types of relief can Americans expect to see over the next few months? Learn more:
As the COVID-19 pandemic entered its second year, Congress enacted the "American Rescue Plan Act of 2021," a $1.9 trillion relief plan designed to help stem the coronavirus pandemic while giving the U.S. economy a much-needed boost.1 What does this plan contain, and what types of relief can Americans expect to see over the next few months?
What's in the American Rescue Plan?
Many of the plan's key details — including $1,400-per-person relief checks — remained relatively unchanged throughout the drafting and negotiation process.2 However, other proposed relief, including an increase in the federal minimum wage to $15, were scrapped in the Senate.3 As enacted, the American Rescue Plan provides:
- Direct payments of $1,400 per person (including children) to households with individuals earning an adjusted gross income (AGI) of up to $75,000 per year or couples (filing jointly) earning up to $150,000 per year. This $1,400 payment will be gradually phased out for individuals earning between $75,000 and $80,000 and for couples earning between $150,000 and $160,000.4
- Additional federal unemployment payments of $300 per week through September 6, 2021.5
- An expansion of the child tax credit from $2,000 to $3,000 for children ages 6 to 17 and to $3,600 for children under age 6.6 This payment will begin to phase out for individuals earning more than $75,000 per year and couples earning more than $150,000.
- An additional $7.25 billion to businesses under the Paycheck Protection Program.7
- Tax-free student loan forgiveness for any federal student loans forgiven between December 31, 2020, and January 1, 2026.8
- Around $28.6 billion for a Small Business Administration grant program designed to help restaurants and other food service establishments.9
- Another $21.55 billion for emergency rental assistance, which includes approximately $5 billion for emergency housing vouchers designed to help people avoid homelessness.10
Putting the American Rescue Plan into Action
Government officials have suggested that the $1,400 relief checks may be issued as early as by the end of March, with many taxpayers being paid through direct deposit from the IRS.3 And more checks may be coming for many parents — those who qualify for the enhanced child tax credit can choose either to apply this credit to their total tax liability when filing 2021 taxes or to have it paid out monthly (up to $300 per month) beginning in July 2021.11 Legislators hope that this tweak to the tax law will help get these much-needed payments and credits into consumers' pockets as quickly as possible.
What's not yet clear is whether this is the last coronavirus relief bill. Although vaccination rates are increasing while COVID-19 diagnosis rates are decreasing, experts report that large sectors of the U.S. economy (including the travel, entertainment, and restaurant industries) are still on precarious footing.12 Other experts caution that once statewide eviction and foreclosure moratoriums begin to expire, courts could find themselves backlogged with housing-related cases.13 Although the American Rescue Plan hopes to return the economy to full employment beginning in 2022, if it doesn't have the desired effect, more relief could be on the way later in 2021 or early 2022.14
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
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