FINANCIAL PLANNING: American Rescue Plan of 2021


With new administration comes new tax legislation. Economic stimulus and relief from the ongoing COVID-19 pandemic is the intention of the American Rescue Plan of 2021. Taxpayers will see the third round of stimulus checks at $1,400 per individual, including children or parents claimed as dependents. The phaseout limits for this round are between $75,000 and $80,000 for single filers and $150,000 to $160,000 for those married filing joint returns. If AGI is over those limits, the Recovery Rebate will be $0. If the 2020 tax return has not been filed, and your 2019 AGI is at or below the threshold, the rebate will be sent. If your 2019 AGI is within the limit, you may get a reduced rebate check. If you file your 2020 tax return and your 2020 AGI is below the threshold, you will get an additional check for the difference. September 1, 2021 is the last date for Additional Payment Determination. The last option a taxpayer has to determine the amount of the 2021 Recovery Rebate Credit is their 2021 tax return. If a taxpayer has an AGI below the threshold for 2021, a credit will be applied on their tax return.


In 2021, the Child Tax Credit is increased to $3,000, from $2,000 per qualifying child (age 17 and under) and is fully refundable. The phase out for Single taxpayers is $75,000 and $150,000 for Married Filing Jointly and for every $1,000 over that amount, the credit is reduced by $50. This phaseout does not apply to the “regular” $2,000 Child Tax Credit, which has its own limit of $400,000 for married filing jointly, and $200,000 for single filers.


If your 2019 and 2020 AGI disqualified your Rebate, you may be able to make some adjustments to your income to improve your eligibility in 2021. You may be able to delay income, or a bonus. You can also increase contributions to employer sponsored retirement accounts for 2021 – Pay yourself instead! Other adjustments to income include Health Savings Account contributions, student loan interest deduction, and tuition and fees deduction. If you plan ahead, you may get the rebates and credits available through the American Rescue Plan of 2021. We encourage you to speak with your tax advisor to ensure that you are proceeding with the right strategy for your personal situation.

The information contained in this material is based on sources believed to be true and reliable; however, its accuracy is not guaranteed. This material should not be construed as a recommendation to buy or sell specific securities. Views are based on market conditions, economic data, and other information at the time of publication and are subject to change.