You’ve no doubt heard about a new COVID-19 relief plan that was signed into law by President Biden on March 12, 2021. It’s called the American Rescue Plan, and here are the items within the new law that may impact your family.
A third round of stimulus checks
The CARES Act provided up to $1,200 to most Americans and another payment of up to $600 was recently sent as a result of the Continuing Appropriations Act. The American Rescue plan includes a third direct payment of up to $1,400 and another $1,400 for each dependent you have.
An increase to the Child Tax Credit
This tax credit is given to families to help offset the cost of having children. It’s usually up to $2,000 per child, but the American Rescue Plan raises the credit to $3,000 per child ($3,600 if your child is under 6 years old). Additionally, half of the Child Tax Credit will be given in advance via monthly payments directly to families. The age limit for qualifying children is also being raised from 16 to 17 years old.
An increase to the Child and Dependent Care Tax Credit
This tax credit is taken by families with child care and senior care expenses. This can include hiring a nanny, paying for in-home senior care and sending kids to day care or summer day camps. The American Rescue Plan increases the amount of expenses that can be applied to the Child and Dependent Care Tax Credit from $3,000 to $8,000 if you have one child, and from $6,000 to $16,000 if you have two or more children. Since you can apply more expenses to the credit, you can save more money when you file your taxes.
A bump in savings from a Dependent Care Account
This type of flexible spending account can be used to pay for many of the same care expenses just described in the Child and Dependent Care Tax Credit tax-free. This creates a large amount of tax savings annually for families. Usually there is a $5,000 limit for a Dependent Care Account each year, but the American Rescue Plan increases this amount to $10,500 for 2021.
An extension in paid sick leave and paid family leave credits
The Families First Act gave caregivers the ability to take paid sick leave or paid family leave for various reasons related to COVID-19. If this occurred, the families who employ them would get tax credits to cover the wages they paid to their caregiver while they were out of work. These credits were set to expire at the end of March but have been extended through August 31 by the American Rescue Plan.
We hope this information gives you a better understanding of what is in the American Rescue Plan. Many families should benefit from lower care costs due to this new law so please share this information with others who may have questions.
Are you a nanny, senior care worker or other type of caregiver? Here’s how the American Rescue Plan may impact caregivers.
