COVID-19 Relief Law - New Stimulus Explained, Individuals
The new coronavirus relief bill extends and modifies several provisions in the original CARES Act, originally passed in March. The package extends relief through mid-March of 2021, providing support to help people and businesses get through the next several months of the pandemic. The following sections are explanations of the key areas that impact individuals.
Extension of Unemployment Benefits
An 11-week extension of the unemployment insurance (“UI”) compensation benefits. The extension applies to the Pandemic Unemployment Assistance (“PUA”) that extends UI benefits to workers who traditionally are ineligible, such as Gig Economy workers and Independent Contractors, and Federal Pandemic Unemployment Assistance (“FPUA”), which will provide an additional $300 per week supplement to state UI compensation. Additionally, the Pandemic Emergency Unemployment Compensation (“PEUC”) originally providing an additional 13 weeks of UI benefits will also be extended for 11 weeks (for a combined maximum of 50 weeks) and will expire on March 14, 2021.
Direct Payments or Stimulus Checks
A second round of direct payments to individuals was finalized but with changes. The new round of direct payments is $600 per individual and qualified child, with no cap on household size. The rebate would be designed similarly to the Recovery Rebates, as they will be advanced tax credits based on 2019 income and begin to phase out in value beginning at $75,000 for single filers, $112,500 for heads of household, and $150,000 for those married filing jointly. The payments phase out entirely at $87,000 for single filers with no qualifying dependents and $174,000 for those married filing jointly with no qualifying dependents.
Child Tax Credit & Earned Income Credit
Adjustments to how the Child Tax Credit (“CTC”)and the Earned Income Tax Credit (“EITC”) are calculated for the 2020 tax year. The adjustments to the provision would use 2019 income to determine an individual’s credit eligibility for the 2020 tax year.
The above-the-line charitable contribution is extended through 2021 at $600 for those married filing jointly and $300 for other filers. This means taxpayers will be able to take the standard deduction and deduct up to $600 in charitable giving when calculating their taxable income. For the 2020 tax year, taxpayers could deduct up to $300 above-the-line for charitable contributions.
Flexible Savings Accounts
Flexible Savings Account ("FSA") balances can be rolled from the 2020 tax year into 2021, and 2021 balances can be rolled into 2022. This will help taxpayers with unused balances such as for childcare expenses who would normally lose the value of the FSA balance at the end of the tax year.
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