Tax components of Joe Biden’s stimulus plan

As Joe Biden takes office on Jan. 20, 2021, his team’s proposed American Rescue Plan would cut taxes for some and provide aid to state, local, and tribal governments. The proposed $1.9 trillion stimulus plan includes a number of changes to tax provisions that might be an interest to tax professionals.

1. Economic impact payments: The plan includes $1,400 stimulus checks for those who are eligible. These payments are on top of the $600 payments authorized by Congress in December.
2. Unemployment: Biden is calling Congress to increase supplemental unemployment insurance to $400 per week through September 2021.
3. Child tax credit: The plan would raise the child tax credit (CTC) to $3,000 per child and make it fully refundable for 2021. Additionally, the credit would be raised to $3,600 for a child under 6 years old, and 17-year-olds will be eligible.
4. EIC: The earned income credit (EIC) would be expanded, raising the maximum amount for workers without children to approximately $1,500 (from $538 for the 2020 tax year; $543 for the 2021 tax year) and raising the income cap for those eligible to approximately $21,000 from $16,000.
5. Child and dependent care tax credit (CDCTC): Biden’s plan would temporarily expand a tax credit for child care so families will get money back as a credit for children younger than 13 - $4,000 for one child and $8,000 for two or more children. This credit would begin to phase out at a family AGI of $125,001, with a complete phaseout at $400,001.

NATP will continue to provide updates if the proposal becomes legislation.