Stimulus Control Update: Here are 5 ways the new law can put money in your pocket. It’s over $1,400. – Community News
Stimulus Check

Stimulus Control Update: Here are 5 ways the new law can put money in your pocket. It’s over $1,400.

With President Joe Biden signing the $1.9 trillion stimulus package, families are scrutinizing the many strands of sweeping legislation.

There are many amenities that will help families directly.

The benefit you’ll likely see first is the $1,400 individual incentive payments, which could arrive this weekend for people who have bank account information on file with the IRS.

Singles earning up to $75,000 are eligible, as are married people who file joint tax returns and earn up to $150,000. There is a partial benefit for singles earning up to $80,000 and married couples earning up to $160,000. After that you are not eligible.

The bill also lists $1,400 per dependent, including children, students, and elderly relatives you claim on your tax return.

Use our calculator to see how much you can get.

Here are 5 other ways the incentive plan can put more money in your pocket.

1. Tax Credits for Parents

The new law increases the amount of money that parents can get by significantly expanding the child tax credit.

Parents with children ages 6 to 17 can get up to $3,000 per child, plus $3,600 for children five and under, against the $2,000 per child with a cutoff at age 16.

Parents receive monthly payments from July to December and the remainder of the credit can be claimed on the 2021 tax return.

The phasing out of credit is complex.

It would gradually disappear for singles earning up to $75,000 and married couples filing joint returns earning up to $150,000.

After that, the credit is reduced by $50 for each additional $1,000 of adjusted gross income until the credit reaches $2,000 per child, said Garrett Watson, a senior policy analyst at Tax Foundation.

That would happen for singles earning up to $95,000 and married couples earning up to $170,000. Once you reach that income level, you are eligible for $2,000 per child until you reach an income level of $200,000 for singles and $400,000 for couples. Credit will be cut for singles earning more than $240,000 and couples earning $440,000, he said.

The credit is also fully refundable, meaning you get the full amount even if you don’t owe any tax.

2. Extensive tax credits to help with childcare costs

As a result of the Incentives Act, the Child and Dependent Care Credit will be considerably expanded by one year.

The credit helps parents with children under 13 to pay for childcare.

The credit has been increased to a maximum of $4,000 for one child or $8,000 for two children, from $1,050 and $2,100 respectively.

The credit phase-out is calculated based on income level and a percentage of eligible expenses.

Those who earn up to $125,000 can take the full credit, which is 50% of the expenses up to the $4,000 and $8,000 limits. Those who earn more may take credit, but the 50% figure drops by 1% for every $2,000 in income over $125,000. Taxpayers earning more than $400,000 are not eligible.

3. Boosts for Dependent Flexible Spending Accounts

The incentive package allows you to save more on flexible spending for dependents (FSA), if your employer so chooses.

Parents can usually save $5,000 in an FSA, but the stimulus bill more than doubles that amount to $10,500. The change only applies to 2021.

The bills allow employees to save money, before taxes, to pay for childcare costs for children under 13 or for eligible dependent adults who share the household. Saving the money before taxes can lower a family’s total taxable income.

The money can be used for day care, summer camp and preschool classes. They can also be used to pay for adult day care costs.

Dependent care FSA accounts are “use it or lose it,” meaning if you don’t spend the money during that tax year, it’s usually forfeited.

Many parents who were unemployed or working from home because of the pandemic saved too much in their FSA accounts and risked losing the money, so the IRS allowed employers to transfer unused funds from 2020 contributions to 2021 and 2021 contributions to 2022.

But employers are not obliged to adopt the changes.

4. Healthcare Help

People who have lost their jobs have always been allowed to continue their employer’s health care coverage through COBRA – Consolidated Omnibus Budget Reconciliation Act – but it is expensive.

Through COBRA, people usually pay the full cost of their plan.

But under the new incentive law, the federal government will collect the bill for COBRA from April 1 to September 30, 2021.

And for those who have purchased health insurance through a government exchange, the government helps with the premiums. According to the new law, your premium may not exceed 8.5% of your modified adjusted gross income.

If you already have a subscription, you don’t need to do anything to take advantage of the lower cost.

5. Unemployment Benefits

The stimulus bill gives the unemployed an additional $300 a week through September 6.

It also waives federal taxes on the first $10,200 in unemployment benefits for singles, or $20,400 for married couples who both collect unemployment and file joint tax returns. To qualify for the tax break, households, whether single or married, must earn no more than $150,000.

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Karin Price Mueller can be reached at: [email protected].

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