The American Rescue Plan Act of 2021: What does the New $1.9 Trillion Federal Relief Law Contain?

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021.  This new law puts $1.9 trillion of government spending into effect for relief from the Covid-19 pandemic and related purposes.  Similar to the $2.2 trillion CAREs Act that came a year before it, the American Rescue Plan is likely to have a substantial financial impact on many Americans.

However, at 242 pages the new law is long, dense, and may be hard to understand.  The following is a list of the main highlights from this new legislation that are most likely to have a direct impact on American finances:

  • The law provides a “Recovery Rebate” of up to $1,400 each for all adults and their dependents.  This provision is contingent on the recipient’s adjusted gross income from his or her most recently filed and processed federal income tax return, either 2019 or 2020.  The rebate payments begin to phase out at $75,000 for single filers, $112,500 for Heads of Household, and $150,000 for joint filers. Households with earnings of more than $80,000 for single filers, $120,000 for Heads of Household, and $160,000 for married filing jointly will not receive any payment.
  • The law extends the existing federal supplement of $300 per week for state unemployment benefits through September 6, 2021.  Without this extension, the federal support would have ceased on March 31, 2021.
  • The law expands the Child Tax Credit in the internal revenue code by allowing households with children to claim a tax credit of up to $3,600 for younger children or $3,000 for children age 6 or older, regardless of earned income level.  This tax credit is now fully refundable with proposed monthly payments to recipients. 
  • The law increases both the Child and Dependent Care Tax Credit and the Earned Income Tax Credit, but only for 2021 and with several substantial technical restrictions for each.
  • The law makes forgiveness of student loans a tax-free event.  The law does not actually forgive any student loan amounts, but paves the way for the federal government to do so in future legislation.
  • The law provides additional funds to the Small Business Administration for continuation of existing programs and creation of new initiatives designed to support and benefit businesses, namely:
    • An additional $7.25 billion for the existing Paycheck Protection Program (PPP), including funding to expand eligibility to additional organizations
    • An additional $1.25 billion for the Shuttered Venue Operators Grant program that benefits musical halls and concert venues that closed due to Covid-19
    • An additional $15 billion for Targeted Economic Injury Disaster Loans that provide relief to businesses experiencing economic losses attributable to Covid-19
    • A disbursement of $28.6 billion for the new Restaurant Revitalization Fund that will reimburse restaurants for the difference between their 2019 and 2020 gross receipts              
    • A disbursement of $100 million for the new Community Navigator program to improve access to SBA programs
  • The law gives $350 billion to state and local governments facing budget shortfalls.  Generally, the larger the budget shortfall, the more funds a government will receive.
  • The law provides about $50 billion in housing aid through various programs.  Some of these programs help cover mortgage payments or rent for individuals who have been negatively affected by economic difficulties arising from Covid-19.  Other programs provide backing for Section 8 housing, fund housing for the homeless, and offer payments for utility costs.
  • The law provides about $165 billion for Covid-19 vaccine distribution, testing, contact tracing, and on-going pharmaceutical research.
  • The law affords $55 billion in aid for transportation industries negatively affected by the pandemic, including commuter rail, airlines, and airports.
  • The law also offers funding for a number of additional items, including farm loan forgiveness and other farmer support, shoring up Medicaid and the Affordable Care Act, and cybersecurity.

This simple laundry list of items in the American Rescue Plan Act of 2021 has provided a very general view of what the Act contains.  If you would like additional guidance for navigating potential benefits and pitfalls in this new law, please reach out to your First Bank Wealth Management Financial Advisor. 

By: Charles Claver
Senior Vice President and Family Wealth Advisor 

Charles Claver is a Senior Vice President, Director Investment Management & Trust and heads-up the Family Wealth Advisor team for First Bank Wealth Management. Possessing over 20 years of experience in the financial services field, his expertise includes private wealth, investment/retirement/estate, commercial/ personal lines of insurance, and private banking. You may reach him at (310) 887-0100  or via email at [email protected].