President Biden has just signed into law one of the most significant financial packages for working families in recent memory. It’s going to change the lives of many of your employees.
Unfortunately, the $1.9T stimulus does little to reduce the complexity of navigating government programs. And it still leaves employees with the task of financial planning in the face of great uncertainty.
Here are key ways the law will affect your employees.
Bigger stimulus checks
The stimulus offers $1,400 per adult and $1,400 per dependent—and it broadens the definition of who qualifies as a dependent.
THE TAKEAWAY: A married couple with two dependents and an adjusted gross income (AGI) of less than $150,000 can expect to receive $5,600.
Cash for parents
The 2021 Child Tax Credit jumps up to $3,600 per child age 5 and under and $3,000 per kid age 17 and under. It will also be paid partially in advance, starting in July 2021. And where historically the credit helped only people who owed taxes, it is “refundable” for 2021, meaning even those who don’t owe can get all of the credit.
THE TAKEAWAY: On top of their stimulus checks, a household with two dependents could receive an additional $7,200, with periodic payments starting in 2021.
Relief for childcare costs
The 2021 child and dependent care tax credit will increase for two children to $8,000 (from $2,100) and for one child to $4,000 (from $1,050). The credit will also be fully refundable.
THE TAKEAWAY: An additional $8,000 for a qualifying two-child household with qualifying expenses.
More Earned Income Tax Credit (EITC)
The fully-refundable EITC is one of Congress’s ways to increase the incentive to work for moderate income families. Under the new law, older workers are now eligible, and childless workers can start claiming at age 19 instead of 25 (excepting some students). Additionally, the max benefit amount has nearly tripled, from $543 to $1,502.
THE TAKEAWAY: Up to an additional $1,502 in the pocket of every one of your qualified employees claiming without children.
Relief on unemployment taxes
Many people who claimed the generous pandemic unemployment during furloughs or layoffs underwithheld. Those who did were on their way to nasty surprise tax bills that were already causing employee stress. The stimulus retroactively makes the first $10,200 of benefits tax-free for people under an income threshold (though only for 2020).
THE TAKEAWAY: Let your employees know they may owe less than they feared, or that they may be due a rebate if they’ve already filed. The IRS will need to issue guidance as to whether those who have already filed will need to file amended returns or if rebates will be automatic.
Help for renters
Housing stress has been a massive issue for working families during the pandemic. The new law includes $20 additional billion on top of the previously enacted $25 billions in emergency assistance for renters, focused on those who have fallen behind due to the pandemic.
THE TAKEAWAY: For example, a worker behind on rent due to an adult in their household who lost work because of COVID can get up to 15 months of assistance. But help is not automatic, so applying quickly through local government programs is critical.
Beefed up unemployment
For employed people with spouses still out of work, the law extends the period current recipients can claim until September 6, 2021. It also extends the weekly $300 supplement to normal benefits through then.
THE TAKEAWAY: Your employees who are supporting out-of-work adults in their households will find things a bit easier, at least through September.
This bill is going to change a lot of lives. Still, it can be complex even for seasoned legislators, let alone the average worker. That means your employees are going to have questions. That’s where Brightside comes in.
Our professional Financial Assistants provide your employees with personalized, actionable information about money, including government benefits and tax changes. Unlike an online calculator, we tailor our guidance based on an up-to-the-minute understanding of policy changes and the employee’s own particular situation.
And, of course, we’re here when the stimulus runs out, as well as for those who don’t qualify for some or all of the new programs. All we care about is helping your employees make the best use of the financial resources at their disposal, to make sure they have the security they work so hard for.