Economic Relief Provided by The Latest Stimulus Plan

Key Takeaways
  • The third round of stimulus checks comes with different qualifications.
  • Enhanced federal unemployment benefits extended through September 6, 2021.
  • Prepayment of increased Child Tax Credit begins in July.
  • Healthcare exchange reopened, allowing for new enrollments.

The vaccine’s rapid roll out improves the economic outlook, offering hope that things can return to normal in 2021. However, as of February 2021, the unemployment rate of 6.2% is still nearly double what it was in February 2020, when only 3.5% of the workforce was out of a job. Some industries like restaurants, entertainment, and retail outlets are far from back to normal.

To address these lingering issues, Congress passes the sixth stimulus package in a year to help those still reeling from the pandemic. Here are the key measures that could provide financial assistance:

Another Round of Stimulus Checks

For the third time in a year, individuals and families received direct payments from the IRS. The latest round is also the largest payment, amounting to $1,400 for qualified individuals, including dependents of all ages. Previous check amounts were $1,200 and $600 and did not include dependents over 16.

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Another key difference in the third round of payments is the lower wage cut-offs. The lower phase-outs begin at $80,000 for single filers and $160,000 for couples filing a joint return. A head of household can earn $120,000 before the phase-out starts. The IRS will use either your 2019 or 2020 tax filing depending on whether you filed before the payment was sent. For households who have not filed, if the amount would be higher based on your 2020 return and you file by July 15, 2021, the IRs will automatically process payment for the difference.

Changes to the Child Tax Credit

For years, the Child Tax Credit offered a partially refundable credit designed to lower taxes for families with children. The thresholds began at $200,000 for single filers and $400,000 for couples filing a joint return, provided tax relief for all but the wealthiest tax filers.

The new credit, which is good for one year, makes a few significant changes:

  • It increased the Child Tax Credit to $3,600 for dependents under seven and $3,000 for children between 7 and 18.
  • It is fully refundable. Meaning even if you do not owe taxes, you can receive the full credit.
  • The IRS will prepay up to half the credit starting as early as July through monthly payments.
  • Earlier phase-outs begin at $75,000 for single filers, $112,500 for a head of household, and $150,000 for couples filing a joint return.

Extended Federal Unemployment Payments

Each state has its own rules for unemployment, including who qualifies, how much you receive, and for how long. Payments range from an average of $215 to $550 per week with caps, depending on your state. The program is designed to replace only a portion of income, with some states like DC only replacing an average of 21% of wages. The duration of most state unemployment is 26 weeks.

The pandemic changed unemployment in a couple of ways. It expanded who can receive unemployment benefits to included workers such as the self-employed and tipped employees. Added federal payments on top of state benefits and extended the payment period.

The latest package adds $300 in weekly federal benefits to state benefits through September 6, 2021.

Tax-Free Status

The IRS will not tax stimulus checks and the first $10,200 of unemployment, per person, for 2020 tax filings.

Reopened Healthcare Exchange

You must enroll each fall to qualify for a subsidized healthcare plan. For 2021, you can enroll in the Marketplace Exchange through August 16, 2021.

The new stimulus package also increased subsidies. Instead of capping payments at 10% of income, the new law lowers the maximum to 8.5%. It also increased the income you could earn and still receive a subsidy, raising it to 400% of your state’s poverty level based on your household size. The increase means a family of four could earn $104,800 and still qualify for a subsidy. The adjusted benefits will last for two years, retroactive to January 2021.

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Help with COBRA Payments

Workers who enrolled in COBRA might qualify to receive premium payments through September 2021, starting April 1, 2021.

Assistance with Housing and Utilities

The extended moratorium on foreclosures through June 30, 2021, could save your home. However, homeowners that do not qualify for a forbearance, renters, and families needing help with utilities could find it impossible to catch up a year or more of missed payments.

The new law provides states with $25 billion to help with rent and utility payments and another 10 billion for mortgage assistance.