Signed into law: March 11, 2021
Total funding: $1.9 trillion
Purpose: To provide economic relief and support recovery from the COVID-19 pandemic.
Many provisions of the American Rescue Plan Act applied only to specific tax years.
🔹 Key Tax Provisions
✅ Recovery Rebate Credit (Third Stimulus Payment)
- $1,400 per individual and dependent
- Phaseout begins at:
- $75,000 (Single)
- $150,000 (Married Filing Jointly)
- Based on 2019 or 2020 AGI
✅ Expanded Child Tax Credit (CTC)
- Increased to:
- $3,000 per child (ages 6–17)
- $3,600 per child (under age 6)
- Fully refundable for 2021
- Advance monthly payments from July–December 2021
- Phaseout begins at:
- $150,000 (MFJ)
- $112,500 (HOH)
- $75,000 (Single)
✅ Earned Income Tax Credit (EITC) Expansion
- Increased credit for childless workers
- Minimum age lowered to 19 (except students)
- Maximum age eliminated
- Investment income limit raised to $10,000
- Option to use 2019 income instead of 2021
✅ Child and Dependent Care Credit
- Made refundable for 2021
- Increased expense limit to $8,000 for two or more dependents
- Increased employer-provided dependent care exclusion to $10,500
✅ Premium Tax Credit (PTC) Expansion
- Enhanced subsidies for 2021 and 2022
- Special rule for taxpayers receiving unemployment compensation in 2021
✅ Unemployment Compensation
- First $10,200 of 2020 unemployment benefits excluded from income for households earning <$150,000
✅ COBRA Continuation Coverage Credit
- Covers 100% of COBRA premiums from April–September 2021
- Refundable credit against Medicare tax
✅ Paid Sick and Family Leave Credits
- Extended through September 30, 2021
- Increased cap to $12,000
- Expanded to include COVID-19 vaccination leave
- Available to self-employed and government entities
✅ Employee Retention Credit
- Extended through December 31, 2021
- Credit of up to 70% of wages (max $10,000 per employee per quarter)