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The TurboTax Blog > Tax News > American Rescue Plan: What Does it Mean for You and a Third Stimulus Check

American Rescue Plan: What Does it Mean for You and a Third Stimulus Check

Tax News What the American Rescue Plan means for you and a third stimulus check

August 6, 2021 Update: The Biden Administration has extended the student loan pause until January 31, 2022.

March 12: The IRS has begun distributing stimulus payments and we expect eligible people could receive their stimulus payments as early as next week (March 17th). We anticipate that the IRS Get My Payment tool will be updated next week. 

For information on when you can expect your stimulus payment, visit the “Where’s My Third Stimulus Check?” blog post

March 11: The American Rescue Plan was signed into law on March 11, 2021. The plan includes a third round of stimulus payments for millions of people. In addition, the bill also extends certain unemployment benefits and expands tax relief for unemployment benefits, the Child Tax Credit and the federal Earned Income Tax Credit (EITC).  

Here is what you need to know:

Third Stimulus Payments for Individuals and Joint Taxpayers

Those eligible will get up to $1,400 in stimulus payments for each taxpayer in their family plus an additional $1,400 per dependent. This means a family with two children could receive $5,600.

Unlike the previous two rounds, you will receive stimulus payments for all your dependents, including adult dependents and college students.

Although you may want to file your 2020 return now in order to provide your most recent information to the IRS, including bank account information, you don’t need to do anything to get your stimulus check. The IRS will determine eligibility based on your last tax return, either 2019 or 2020, and will likely send your payment to the bank account where your tax refund was deposited

So, how do you know if you may be eligible to receive a third stimulus payment?

If you have an adjusted gross income (AGI) of up to $75,000 ($150,000 married filing jointly), you should be eligible for the full $1400 stimulus payment.

*Note, adjusted gross income (AGI) is your gross income like wages, salaries, or interest minus adjustments for eligible deductions like student loan interest or your IRA deduction. Your AGI can be found on line 8b of your 2019 Form 1040 or on line 11 of your 2020 Form 1040.

As your AGI increases over $75,000 ($150,000 married filing jointly), the stimulus amount will go down. The stimulus check rebate will completely phase out at $80,000 for single filers with no qualifying dependents and $160,000 for those married filing jointly with no dependents. 

Once again, mixed-status households (households with different immigration and citizenship statuses) will be eligible for stimulus payments.

Expanded Unemployment and Retroactive Tax Relief

 Unemployment payments will increase by $300 per week and the benefits will be extended through September 6, 2021.

The bill extends the Pandemic Unemployment Assistance (PUA), which expands unemployment to those who are not usually eligible for regular unemployment insurance benefits. This means that self-employed, freelancers and side giggers will continue to be eligible for unemployment benefits.

The bill also makes the first $10,200 of unemployment income tax-free for households with income less than $150,000. This provision would be retroactive to tax year 2020 (the taxes you file in 2021).

Expansion of Credits for Children of Workers

The American Rescue Plan also includes an expansion of tax credits for lower-income workers with kids. 

Enhanced Earned Income Tax Credit

Beginning next year, the Federal Earned Income Tax Credit has been expanded for workers without kids and nearly triples the maximum credit. Eligibility is also extended for a wider range of filers, now allowing taxpayers to qualify who are over 65 or between the ages of 19-25.

Expanded Child Tax Credit

Beginning in tax year 2021(the taxes you file in 2022) the Child Tax Credit will be expanded. The bill increases the amount that families claiming the Child Tax Credit receive from $2,000 to:

  • $3,600 for each child under 6
  • $3,000 for each child age 6-17

The credit is now fully refundable – that means that you are eligible for the credit even if you don’t owe taxes.

Although this credit is for next year’s tax filings, payments will also be sent in advance, over the course of the year, beginning no earlier than July 2021 so people don’t have to wait to file their  2021 taxes. The IRS will likely determine eligibility based on your most recent tax filing.

Tax Relief for College Students

The American Rescue Plan provides relief to students with government and federal student loans by allowing students with forgiven loan debt to exclude the discharged debt from their taxable income for tax years 2021 through 2025.

The provision does not apply to loans made by private lenders.

President Biden’s January executive order further extended the suspension of federal student loan payments and interest through the end of September 2021. 

On August 6th the Biden Administration passed the final extension of the pause on Federal student loan repayment, interest, and collections until January 31, 2022.

The pause includes the following relief for eligible student loans:

  • Suspension of loan payments
  • 0% interest rate
  • Stopped collections on defaulted loans

Note: You do not have to pay a fee to get 0% interest or suspended payments for federal student loans.

Tax Relief for Self-Employed

The American Rescue Plan extends refundable tax credits for sick leave and family leave through tax year 2021 for both eligible self-employed and small business owners. The provision also allows you to use prior year net earnings from self-employment in the calculation of the average daily self-employment income if the prior year’s net earnings help you arrive at a higher average daily self-employment income. If you or a family member were impacted by coronavirus and you could not conduct your business, find out if you are eligible for the qualified sick and family leave credits using the Intuit Tax Credit Estimator.

Temporary Waiver to Pay Back Advance Premium Tax Credits

Due to the challenges Americans faced with fluctuating income in 2020, the American Rescue Plan temporarily waives the requirement for taxpayers to pay back excess advanced premium tax credits on their 2020 taxes since taxpayers may have received more income than projected when applying for a subsidy to help pay for Marketplace insurance.  

The American Rescue Plan will also provide Cobra subsidies from April 2021 through September 30, 2021, for those who are laid off or experience reduced hours in 2021.

March 10: The American Rescue Plan passed the House today. The legislation still includes a $1,400 stimulus check for eligible Americans, expanded unemployment, and tax relief on unemployment benefits for households making under $150,000. The legislation will now go back to the President to be signed into law and we anticipate this will happen on Friday. 

March 6: The American Rescue Plan passed the Senate today. As it stands today, the legislation agreement includes a $1,400 stimulus check for eligible Americans, expanded unemployment, and tax relief on unemployment benefits for households making under $150,000. The amended legislation will now go back to the House for passage before being sent to the President to be signed into law.

February 27: The COVID Relief legislation, known as the American Rescue Plan, passed the House of Representatives and has been sent to the Senate for discussion and voting. As it stands today, the legislation includes a $1400 stimulus check for eligible Americans and further tax relief through an expanded Child Tax Credit and Earned Income Tax Credit.

February 16:  In January, President Biden proposed a $1.9 Trillion emergency coronavirus relief plan, called the American Rescue Plan. As it stands today, the plan includes a third direct stimulus payment, expanded unemployment, and the expansion of tax credits for families with kids.

President Biden has said that the American Rescue Plan is a priority for him and things are evolving quickly. We know how important these funds are to you, but no new law has been passed, yet, authorizing these payments. 

The bill is currently working through Congress where changes could be made prior to a vote. If the House of Representatives passes the plan, it will then go to the Senate for discussion and voting and then to the President for signature.

Comments (38) Leave your comment

  1. I filed a joint 2020 tax return today, Oct 12, 2021. My income in 2019 was 173k while my 2020 income is 85k. I have not received 3rd stimulus pmt because I assume IRS based it on my 2019 income, which was over the limit. Will they now look at my 2020 85k return and send me the 3rd stimulus payment?

    1. Hi Hal,

      The IRS based your eligibility for the third stimulus payment based on the most recent tax return they had processed on file for you. If you were eligible for the third stimulus payment, and did not receive that payment, when you file your 2021 tax return you will be able to reconcile any third stimulus payment that you were eligible for in the form of a Recovery Rebate Credit on your 2021 tax return.

      Hope this helps.
      Best,
      Katharina Reekmans

  2. We filed our federal and state returns via US Mail as I was unable to efile. Our returns were mailed before the most recent COVID Relief bill made the first $10,200 of unemployment income tax-free for households with income less than $150,000. This action was made retroactive to tax year 2020.

    My spouse had just over $7000 in unemployment benefits. These benefits are now tax free. When will we know if we have to file an amended return? If we do not have to file an amended return, will the IRS let us know the new amount that we owe since the $7000 in unemployment compensation are now tax free? Thoughts and guidance would be much appreciated.

  3. Have you guys figured out yet when we will have our taxes adjusted if we’ve already filed our return for the unemployment relief before it was passed?

  4. I’m confused. Is the child tax credit applying for this year? I read starts 2021 but a turbo personnel told me yesterday to hold my taxes for the child tax credit coming through this year.

  5. Hi,

    When will TurboTax be updated to show the relief on unemployment? I haven’t filed yet because I am confused whether I will still owe money back in taxes.

    1. Hi Jade,

      We’re working around-the-clock to make updates to TurboTax based on the recently-enacted American Rescue Plan so our customers can file with confidence and get their maximum refund. We are implementing IRS guidance on unemployment income within TurboTax and expect updates to be available in product by Thursday evening, 3/18.


      Hope this helps.
      Best,
      Katharina Reekmans

    1. Hi Jon,

      Married couples who earned between $150,000 and $160,000 may be eligible to receive a reduced payment. Married filing joint couples with higher incomes than this range are not eligible for a payment.

      Hope this helps.
      Sincerely,
      Katharina Reekmans

  6. My tax return has been accepted but not yet processed, will I still get my stimulus check or does my return need to be processed before I can get my stimulus.

    1. Angelena,

      Eligibility is based on the most recent tax information the IRS has on file for you. If you’ve already filed your 2020 taxes and the IRS has not finished processing your 2020 tax return, your eligibility will likely be based on the information in on your 2019 tax return.

      Hope this helps.
      Sincerely,
      Katharina Reekmans

    1. Hi Janice,

      As part of the third stimulus relief package, stimulus checks of up to $1,400 will be sent to eligible individuals plus an additional $1,400 for each dependent. Unlike the previous two rounds of stimulus payments, you may receive additional stimulus payments for all your dependents, including adult dependents and college students.

      Hope this helps.
      Best,
      Katharina Reekmans

  7. Hi I already filed my taxes on Feb 12, 2021 and I realized that I left a 0 out in my checking account info. How can I correct this! Please help!

    1. Hi Brooke,
      I’m sorry about your information provided to the IRS. Unfortunately the IRS doesn’t have a way to change your information once you filed. If your financial institution rejects and returns your the deposit, the IRS will issue you a check.
      Beest,
      Lisa Greene-Lewis

  8. I read an article where if your taxes for 2020 were under the Max to get the stimulus as opposed to your taxes being over in 2019, you can request to get all 3 stimulus checks. How does one accomplish this with TurboTax? Thank you

    1. Hi Karen,
      If your income in 2020 is less than your income in 2019 and you received a partial stimulus payment or did not receive one at all and you are eligible, you can claim the recovery rebate credit for the first and second stimulus when you file your 2020 taxes. TurboTax has proactive guidance to help you claim the recovery rebate credit if you didn’t receive the first or second stimulus or received a partial payment. Regarding the third stimulus payment under the American Rescue Plan, the IRS will issue the third stimulus payment based on information in your latest accepted and processed tax return(2019 or 2020). If you haven’t filed your 2020 return yet, you can do that now to give your most recent information to the IRS, including bank account or address information to help ensure your third stimulus check goes to the right place.
      Best,
      Lisa Greene-Lewis

    1. Hi Seth,
      If you’ve already filed your 2020 return, hang tight. The IRS will provide guidance on how you can claim these additional benefits soon.
      Once the IRS issues guidance on the new unemployment tax relief, we will update TurboTax with the latest tax changes as soon as possible so that you can claim these additional benefits if eligible. Please check back with the blog for updates.
      Best,
      Lisa Greene-Lewis

  9. Will TurboTax automatically recalculate based on the new law? Is there anything users need to do to see the effects of the new law on their taxes?

  10. When will Turbo tax have the updated unemployment tax relief included in its program? I haven’t filed bc part of my unemployment will now be tax exempt.

    1. Hi Leslie,
      We’re working hard to keep TurboTax up to date with the latest tax changes based on instructions we receive from the IRS. Check back soon to add your unemployment income and file your return.
      Best,
      Katharina Reekmans, EA

  11. I electronically filed my 2020 return claiming 16000 in unemployment benefits . When can I file an amended return to reduce my taxes?

    1. Saverio,
      If you’ve already filed your 2020 return, hang tight. The IRS will provide guidance on how you can claim these additional benefits soon.
      Hope this helps,
      Katharina Reekmans, EA

  12. If I already filed my 2020 taxes return but if it still says that it is processing on the IRS website “Where’s My Refund?” – Will the IRS go by my 2020 “still processing” tax return or my 2019 already processed tax return?

  13. Now that the bill was signed , any ETA when TurboTax will update for those that get the tax break for 2020 unemployment income taxes?

  14. Can we expect our 3rd round stimulus to be direct deposited on time, unlike last time (y’all sent me a paper check for some odd reason).

    1. Jay,
      We know stimulus checks are very important to you. We are working closely with the IRS to make sure eligible taxpayers get their stimulus checks, and we’ve confirmed that the IRS has accurate bank account information for all TurboTax customers.
      Sincerely,
      Katharina Reekmans, EA

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