The following is a brief summary of key provisions included in the American Rescue Plan Act of 2021, signed into law March 11, 2021.
Unemployment Benefit Exclusion for 2020
Effective for 2020 only, the first $10,200 of unemployment compensation, per person, is excluded from taxable income if modified adjusted gross income is $150,000 or less.
Premium Tax Credit
Effective for 2020 only, any advance payment that exceeds the Premium Tax Credit allowed is disregarded and does not increase tax liability on the return. This suspension applies to all taxpayers regardless of income level as a percentage of the federal poverty
level.
Recovery Rebate and Round 3 Stimulus Payment
Eligible individuals may qualify for a 2021 rebate amount of up to $1,400 per taxpayer ($2,800 MFJ), plus $1,400 per dependent. This stimulus payment for dependents is not limited to dependents who are under age 17. The payment starts to phase out when AGI exceeds $75,000 (Single, MFS), $150,000 (MFJ, QW), and $112,500 (HOH) and is fully phased out at $80,000 (Single, MFS), $160,000 (MFJ, QW), and $120,000 (HOH).
Unemployment Benefits Extended
The enhanced $300 per week of Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation is extended to September 6, 2021.
Child Tax Credit
Effective for 2021 only, the Child Tax Credit (CTC):
• Is increased to $3,000 per qualifying child, • Is $3,600 in the case of a qualifying child age five or younger as of December 31, 2021,
• Age limitation is increased from age 16 to age 17, and
• Is fully refundable.
Phase-out. The increased CTC (over the $2,000 prior amount) phases out when modified AGI exceeds $75,000 (Single, MFS), $150,000 (MFJ, QW), and $112,500 (HOH). Once the increased CTC is phased-out, the $2,000 per qualifying child still applies until modified AGI reaches the previous thresholds.
Advance Payment of the Child Tax Credit
The IRS is instructed to establish a program for making periodic payments to taxpayers for the advance payment of the Child Tax Credit. The advance amount will be estimated by the IRS. The IRS will establish an on-line portal which allows taxpayers to elect not to
receive advance payments, or to update relevant information to calculate the advance payment. Advance payments will be made during the period July 1, 2021 through December 31, 2021.
Earned Income Credit
Effective for 2021 only, the Earned Income Credit for individuals without a qualifying child is expanded. The investment income limitation for 2021 is increased from $3,650 to $10,000 and indexed for inflation in future years. Effective for 2021 only, if earned income
for 2021 is less than 2019 earned income, the taxpayer may elect to used 2019 earned income when calculating the 2021 EIC.
Dependent Care Expense Credit
Effective for 2021 only, the Child and Dependent Care Expense Credit is refundable. The dollar limitation on expenses paid for a qualifying person is increased from $3,000 to $8,000 for one qualifying person and from $6,000 to $16,000 for two or more qualifying persons. The maximum percentage of 35% is increased to 50% for AGI up to $125,000 with the credit percentage phasing out and reduced to zero when AGI reaches $438,000.
Dependent Care Assistance Program
Effective for 2021 only, the $5,000 maximum exclusion in increased to $10,500 ($5,250 MFS).
Student Loan Forgiveness Exclusion
For tax years 2021 through 2025, any discharge of student loan debt for any reason, including private student loans, may be excluded from taxable income, as long as there is no provision for the student to provide services to the discharging lender.
Payroll Tax Credits
The new law reinstates the $511/$200 per day 100% refundable payroll tax credit for employees who receive paid sick leave or paid family leave for reasons related to COVID-19. The new law also modifies the reasons for these payments.
Paid Sick Leave Credit. This credit is available for the period beginning on April 1, 2021 and ending on September 30, 2021.
Paid Family Leave Credit. The new law extends the period for this credit for the period beginning on April 1, 2021 and ending on September 30, 2021. This credit is limited to $12,000 in the aggregate for all calendar quarters, including the quarters prior to April 1, 2021.
Self-employed individuals. The self-employed qualified sick leave equivalent amounts and qualified family leave equivalent amounts are also extended for the same time periods.
Employee Retention Credit
The new law extends the Employee Retention Credit to wages paid after June 30, 2021 and before January 1, 2022 and generally follows the same rules that are in effect for the first half of 2021.
COBRA Coverage Assistance
The new law provides funding to help pay premiums for COBRA continuation coverage.
Paycheck Protection Program (PPP)
The new law appropriates additional funds for the PPP and makes some minor modifications.
SBA Loans and Grants
The new law includes provisions that excludes additional SBA grants from income.
Limitation on Excess Business Losses of Non-Corporate Taxpayers
The limitation on excess business losses is extended to tax years beginning before January 1, 2027.
Pensions
Financial assistance is provided to eligible underfunded multiemployer pension plans for plan years 2020 through 2022 Shortfall funding for single employer plans may be amortized over a longer time frame.

President Trump on December 20, 2019, signed into law H.R. 1865 (“The Further Consolidated Appropriations Act, 2020”), a government funding bill that includes significant tax provisions addressing the extension of over 30 expiring tax provisions, retirement plan provisions and disaster relief provisions. The new law includes some substantive changes to TCJA provisions. However, it does not address errors made in drafting the TCJA (i.e., TJCA technical corrections). Thus, for example, it does not correct errors made in drafting provisions relating to the depreciation of qualified improvement property, the effective date of net operating loss deduction changes, or the deduction of legal fees in connection with sexual misconduct.

The following list is a summary of the more significant retirement plan changes:

• The starting date for making required minimum distributions from an IRA is the year the owner turns age 72.
• The age 70½ limit for making IRA contributions no longer applies.
• Under prior law, funds contained in IRAs (and qualified plans) that a non-spouse inherited IRA could be withdrawn over the beneficiary’s life expectancy. Now, so-called “stretch” IRAs are eliminated by virtue of requiring non-spouse IRA beneficiaries (except for a minor child of the IRA owner, chronically ill individual, or anyone who is not more than 10 years younger than the IRA owner) to withdraw funds from inherited accounts within 10 years.
• Long-term part-time employees qualify to participate in a 401(k).
• 401(k) plans are permitted to adopt qualified birth or adoption distributions.
• A new tax credit is allowed for small employers using auto enrollment into their 401(k) plans.
• The legislation adds a new exemption from the 10 percent penalty of I.R.C. §72(t) for early withdrawals from a retirement account. Under the provision, a parent is allowed to withdraw up to $5,000 of funds penalty-free from a 401(k), IRA or other qualified retirement plan within a year of a child’s birth or the finalization of a child’s adoption.  The provision is applicable for distributions made after 2019. 
• Taxable non-tuition fellowships and stipends and nontaxable difficulty of care payments earned by home healthcare workers are treated as compensation for purposes of retirement plan contributions.
• Provisions that allow employers to encourage employees towards lifetime annuities.
• Plan administrative changes that provide additional flexibility for employees and reduce costs for employer sponsors.

The most significant tax provisions that had previously expired are now extended by the Act and listed below:

• Cancellation of qualified principal residence indebtedness exclusion from gross income has been extended through the end of 2020.
• Mortgage insurance premiums deduction has been extended through the end of 2020.
• Medical expense AGI limitation threshold reduced from 10% to 7.5% of AGI for all taxpayers for regular tax and for AMT purposes has been extended through the end of 2020.
• Tuition and fees deduction has been extended through the end of 2020.
• Indian employment credit is extended through the end of 2020.
• Race horse two years old or younger treated as 3-year property instead of 7-year property has been extended through the end of 2020.
• Empowerment zone tax incentives has been extended through the end of 2020. • Nonbusiness energy property credit has been extended through the end of 2020.
• Alternative motor vehicle credit for qualified fuel cell motor vehicles has been extended through the end of 2020.
• Alternative fuel vehicle refueling property credit has been extended through the end of 2020.

The new law also includes a number of miscellaneous provisions, including:

• The repeal of the excise taxes on high cost employer-sponsored health coverage (Cadillac plans) and medical devices that was first enacted under the Affordable Care Act (ACA).
• The repeal of the fee on health insurance providers that was first enacted under ACA.
• The application of the estate and trusts tax rate to unearned income of children (the kiddie tax) has been repealed and replaced with the use of the parents’ tax rate for tax years after 2019.
• The parking tax on certain employee fringe benefits has been repealed.