As much as Berks County families try to stay on top of the information coming in fast and furious pertaining to latest Covid-19 relief bill – the American Rescue Plan Act – the average human attention span is only eight seconds, according to recent studies.
To that end, here are 10 quick things to know about Congress’ $1.9 trillion Covid relief package:
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- Check’s in the mail. Relief payments are heading out rapidly, beginning in March 2021. The refundable tax credit is $1,400 for individuals with up to $75,000 in adjusted gross income. For those who are head of household, that amount is up to $112,500; for married couples filing jointly, expect to receive $2,800 as long as your combined adjusted gross income is $150,000 or less.
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- Dependents differ. Not only is there an additional $1,400 payment for each dependent – both child and non-child – but that definition also applies to children under 19, whereas it used to be children ages 17 and under.
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- Collegiates count. Included in the $1,400 dependent payments are full-time college students under age 24, so if you have one (or more) in your home, take note.
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- Not a phase. Credits exist, but are reduced if you hit a cap. You still qualify if you earned between $75,000 and $80,000 as an individual, but there’s a hard stop after $80,000. Similarly, partial credits exist between $112,500 and $120,000 in earnings for heads of household and $150,000 and $160,000 for married couples filing jointly.
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- Sweet summer news. This summer – and for 2021 only – parents can receive expanded child tax credits, increasing to $3,600 for children under 6 and $3,000 for children ages 6 to 17 (yes, this is a change: 17-year-olds are now considered qualifying children).
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- Know your limits. Child tax credit eligibility phases out for taxpayers with income of $75,000 to $200,000 (single) and $150,000 to $400,000 (married filing jointly).
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- Unemployed get a break. Lost your job? Here’s some good news. Taxes have been waived on the first $10,200 of unemployment compensation received in 2020 for households earning less than $150,000; see IRS guidelines for exact details.
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- Study up. Students may be in the money, with tax-free forgiveness on all student loan types through Dec. 31, 2025, including loans in 20- to 25-year income-driven repayment plans. Future student loan forgiveness programs will be included as well.
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- But wait… there’s more. New legislation affects both private and institutional loans “modified or discharged” between Dec. 31, 2020 and Jan. 1, 2025. It may help to contact your specific lender to learn more.
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- Know what you don’t know. Even the most financially savvy among us have had questions. If you’re not sure where you stand, it’s wise to consult with your CPA or tax professional, as well as your financial advisor.
Fran Post was born and raised in Berks County. He is a vice president and managing director for Tompkins Financial Advisors, overseeing relationships and operations for financial advisory business in the PA region, including strategic wealth management initiatives.
