How Will the American Rescue Plan Impact Your 2021 Tax Liability?
By Alex Brill, Kyle Pomerleau, and Grant M. Seiter
Last week, President Biden signed into law the $1.9 trillion American Rescue Plan (ARP). The plan provides economic relief to households through the tax code, making several credits fully refundable and advanceable and providing stimulus checks that already started arriving in bank accounts this past weekend.
The ARP includes four major tax provisions: a $1,400 recovery rebate credit (aka stimulus checks or economic impact payments), an expansion to the earned income tax credit (EITC), and expanded benefits for most households with children through the child tax credit (CTC) and child and dependent care tax credit (CDCTC). These major tax provisions, in effect only for 2021, are estimated to cost the federal government over $554 billion. (This economic relief follows multiple rounds of legislation in 2020 that included stimulus checks of $1,200 last March and $600 last December.)
We have created a web application to help users explore how the American Rescue Plan will impact their 2021 federal tax liability. Users can specify basic demographic information (age and marital status), the number and age of dependents, the level and composition of their income, and any itemizable expense that a taxpayer may report. The app then calculates income and payroll tax liabilities, as well as the value of refundable and nonrefundable credits. It also allows users to see the plan’s impact on average and marginal tax rates compared to previous law …
Read the full post at AEIdeas.