Financial relief for Americans in an economy weakened by the COVID-19 pandemic is the objective behind recent stimulus plans enacted by the federal government. Much of the assistance has been delivered through two pieces of legislation: the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), signed into law by President Trump on March 27, 2020, and the American Rescue Plan Act (the ARPA), signed into law by President Biden on March 11, 2021.

Three rounds of "stimulus payments" for eligible Americans received a lot of attention but were not the only benefits provided to households by the government. Here's a summary of the financial assistance currently in effect.

Under the ARPA, the Child Tax Credit is worth more for many taxpayers and more children qualify. The law made the credit fully refundable, which means that even taxpayers who don't have earned income or don't owe any federal income tax can benefit from the credit.

Starting this summer, parents will receive advance payments on the amount of any 2021 Child Tax Credit they qualify for. This means they won't have to wait until the 2022 tax filing season to benefit from the credit.

All ARPA changes to the Child Tax Credit are in effect only through 2021.

Amount of the credit

As a qualified parent, you can claim:

• Up to $3,600 for each qualified child under age 6
• Up to $3,000 for each qualified child between ages 6 and 17
• Up to $500 for each qualified child who is age 18
• Up to $500 for each qualified child between ages 19 and 24, provided they're attending college full time

Previously, the Child Tax Credit was worth $2,000 for each qualified child under 17. No children over 17 qualified for the credit.

You can get your full credit for 2021 provided your adjusted gross income (also known as your AGI) is $75,000 or less ($150,000 or less if you're married and file jointly). The credit gets scaled down or eliminated for taxpayers above those thresholds. If your high AGI makes you ineligible for the increased 2021 tax credit, you might still qualify to claim the standard $2,000-per-child tax credit. The standard credit gets scaled down or eliminated for individuals with AGI up to $200,000 ($400,000 for married couples filing jointly).

The total amount you'll qualify for in 2021 will be based on information you provided on your most recent tax return.

Advance payments

The IRS will generally pay you 50% of your 2021 credit in six equal, monthly advance payments by direct deposit from July through December this year. You'll be able to claim the other 50% of your credit when you file your 2021 federal income tax return due in April 2022.

The ARPA increased the amount and scope of the child and dependent care tax credit for 2021 only. This credit is intended to ease the costs of caring for a child under age 13 or a dependent adult. You must be able to report income, and the expenses for which you claim the credit must allow you to work.

In 2021, you can use the credit for qualified expenses of up to $8,000 for one dependent or up to $16,000 for two or more dependents. Normally, the limits are $3,000 for one dependent and $6,000 for two or more. Before this year, the credit was worth up to 35% of qualified expenses and was scaled down or eliminated for certain taxpayers with higher AGI. For 2021, the ARPA increased the maximum credit to 50% of qualified expenses. This means the highest credit amount available for this year is $4,000 if you have one dependent or $8,000 if you have two or more dependents. The credit is still scaled down or eliminated for certain taxpayers with higher AGI.

Previously, the credit was nonrefundable. The ARPA made it fully refundable for most taxpayers. So, if you qualify for a full refund and your credit exceeds the amount of tax you owe, you will receive a payment for the excess amount.

The CARES Act made available a new, above-the-line deduction of up to $300 in cash donations to qualified charities. (An above-the-line deduction is one you can qualify to claim even if you don't itemize.) This deduction was originally intended to be available only on 2020 federal tax returns. The $300 limit was per return, meaning that even if you filed jointly with a spouse, the most you could deduct was $300.

The Consolidated Appropriations Act (the CAA), signed into law in December 2020 to supplement the CARES Act, extended the new charitable deduction through 2021. The CAA also allows a couple filing jointly to deduct up to $600 in cash donations to qualified charities on their 2021 return.

On your 2021 return, instead of taking the above-the-line charitable deduction, you'll be able to take an itemized deduction of up to 100% of your AGI for cash donations to qualified charities. This is the extension of a CARES Act provision that applied to 2020 returns. Without this extension, your 2021 itemized deduction of cash donations to qualified charities would have been limited to 60% of AGI.

Under the CARES Act, plan sponsors can allow an eligible high-deductible health plan (HDHP) with a health savings account (HSA) to cover telehealth services before patients meet their deductible. This CARES Act provision is currently set to expire on January 1, 2022.

The CARES Act also allows patients to use funds in an HSA or health care flexible spending account (FSA) to purchase over-the-counter medications. This provision has no expiration date.

The ARPA allows qualified individuals to receive a $300 federal supplement to weekly state unemployment benefits through September 6, 2021. Before the ARPA was signed into law, the supplement was set to expire on March 31, 2021. Other federal assistance may be available once state unemployment benefits have been exhausted.

The first $10,200 of unemployment benefits received in 2021 is excluded from federal income tax. (On a joint return, each spouse can exclude the first $10,200.) The exclusion applies only to households with AGI below $150,000, regardless of filing status.

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, legal or other professional advice. Please refer to your advisors for specific advice.