Bob's Blasts

Bob's Blast
April 2021

The American Rescue Plan Act
Only a few months into a new administration, the American Rescue Plan Act was passed and is being implemented.  This $1.9 trillion bill is set to provide further fiscal stimulus in response to the ongoing CoVID-19 pandemic.  

Stimulus Checks
The centerpiece of the bill is a third round of stimulus payments in the amount of $1,400 per eligible individual.  Eligibility in this cycle has been extended from children under the age of 17 to all dependents in the household (which can include children in the later years of high school, or in college if still claimed as a dependent, as well as parents who are claimed as dependents).  

Full stimulus checks will be sent to individuals with adjusted gross income below $75,000, fully phasing out at $80,000 of income.  Head of household full payment below $112,500, phasing out at $120,000.   Married filing joint full payment under $150,000, phasing out at $160,000.   

For anyone who has yet to file their 2020 tax return, your 2019 return will be used in determining eligibility at this time. 2020 income will be used for anyone filing before the bill was passed.   Anyone whose 2019 income was too high for a stimulus payment will be able to use their 2020 income if below the limits.   While a check will not be issued, you are able to claim previous stimulus payments as a tax credit when you file your 2020 return if your income dropped below the limits in 2020 and you did not receive a payment in 2019.   Be sure to notify your accountant whether you received a stimulus payment in 2019.   

These stimulus payments are considered tax credits and are not taxable when you file your return.  The latest stimulus payment is actually a pre-paid 2021 credit, so you may be eligible for a rebate on your 2021 return if you fail to meet the requirements this year.   

Child Tax Credit
The next direct impact on individuals in the bill is the temporary enhancement to the child tax credit for 2021.   This bill increased the maximum credit to $3,000 (up from $2,000) per qualifying child for 2021 and further increased the credit up to $3,600 per qualifying child under the age of six.  The income thresholds are $150,000 for joint filers, $112,500 head of household, and $75,000 for all other filers.   

This tax credit is fully refundable for 2021 which means parents will get this credit even if their tax liability is less than the credit amount.  The IRS intends to send out 50% of this credit in equal installments from July 1st through December 31st, with the remainder being paid out as a credit on your 2021 tax return.  

Unemployment Benefits
The American Rescue Plan also provides a potential benefit for individuals who received unemployment compensation in 2020.   If a taxpayer’s adjusted gross income was less than $150,000, up to $10,200 of unemployment compensation received in 2020 will be tax free.   

If you received unemployment compensation in 2020 and filed your tax return before the latest bill was passed, you do not need to file an amended return at this time.  The IRS plans to adjust tax returns already filed and issue refunds for any money you are now eligible for as a result of the bill.    

Health Insurance
For those who are or have been involuntarily terminated from employment, the American Rescue plan allows individuals to maintain their existing health insurance, via COBRA, from April through September 2021 at a cost of $0.  

The bill also modifies that maximum amount of income a taxpayer is required to spend on a health insurance plan via the Exchange for 2021 as well as 2022, thus potentially providing additional subsidies for the next two years.  

Student Loans
The American Rescue Plan doesn’t include any student loan forgiveness, but did include a provision that student debt forgiven from 2021 to 2025 will be income tax free.   Many believe this lays the groundwork for upcoming student loan forgiveness legislation.  

Funeral Assistance Program  
In addition to the stimulus bill, the Biden administration will be launching a funeral assistance program that will provide up to $9,000 to cover burial costs for Americans who died of COVID-19.  This program is open to families regardless of income as long as they show documentation and have not already received similar benefits through another program.  FEMA is setting up a dedicated toll-free hotline (1/844-684-6333) and a call center to answer questions about the program and take applications starting Monday, April 12.  Visit for further details.    

Required Minimum Distributions
What wasn’t included in the bill was a waiver of the RMD for 2021 as was done in 2020.  As of now, RMDs will have to be taken in 2021.  

Extension of tax filing date
As a result of the bill, the IRS extended the tax filing deadline until May 17th.  Please send in a copy of the first three pages of your 2020 tax return once completed if you haven’t done so already.  You can also load your tax return into your eMoney vault under the shared documents tab if you prefer over email or mail.   

Moving forward
The federal reserve has maintained its stance on low rates for an extended period of time, so don’t expect savings rates to increase anytime soon.   If you are holding a high amount of cash that will not be needed in the next few years, consider paying off or down any debt as those rates are probably much higher than what you are getting or can expect to get from a savings account or CD.

Please reach out if you have any upcoming cash needs as now may be a good time to trim your equity exposure and lock in some of your gains from the past year.  While equity markets are near all times highs, additional government stimulus has increased the risk of inflation which could increase market volatility moving forward.     


This material is meant for general illustration and/or informational purposes only.  Views expressed in this newsletter may not reflect the views of Royal Alliance Associates, Inc.  It is our goal to help investors by identifying changing market conditions.  However, investors should be aware that no financial advisor can accurately predict all of the changes that may occur in the market.   This material should not be relied upon as investment advice.  Investors should note that there are risks inherent in all investments, such as fluctuations in investment principal.  Past performance is no guarantee of future results.  There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. This article contains forward looking statements and projections.  Neither Royal Alliance Associates, Inc nor its representatives provide tax or legal advice.