Here’s a summary of the main planning opportunities with the Covid Stimulus Bill – American Recovery Act which recently passed the Senate and went back to the House to finalize.
Bulletpoint summary:
- $1,400 stimulus payment for taxpayers and dependents, on income up to 75-80k for single filers and 150-160k for joint filers. This is based on the latest filed tax return, so consider accelerating your filing (if income is dropping below threshold) or delaying filing (if income is increasing)
- COBRA Health insurance – the government will cover the premiums from April 1 to September 30th if you qualify for coverage.
- Child/Dependent Care Credit – expanded benefit from 3k/6k to 4k/8k, up to 50% of expenses. Full benefit expanded for households earning up to 125k, and phases out up to 400k of income.
- Child Tax Credit – increased from 2k per child to 3k per child (3,600 if 5 or under). Half of the credit will be advanced to taxpayers, to be paid starting in July.
- Dependent care flexible spending account – contribution limit increased to 10,500 from 5,000. Employers must allow employees to update their contribution amounts!
- Student loan debt forgiveness – any loans that are forgiven or cancelled between 2021 and 2025 will not be taxable.
