The information contained below should not be construed as tax advice. Please visit with your tax professional with regards to your specific situation.
The following is based on the current House Bill. Changes may be made to the final version of the bill before it is passed. The following is a summary of some of the contents in the bill at this point.
1. Minimum wage:
a. $9.50 will start approximately June 1st
b. $11.00 the first year after
c. $12.50 the second year after
d. $14.00 the third year after
e. $15.00 the 4th year after
f. Annual increases as determined by the Secretary of Labor
2. Unemployment benefits will be extended
3. Recovery Rebates
a. The credit is legislated as a 2021 tax credit, but will be advanced based on your 2020 or 2019 tax return if you have not filed 2020 as of yet.
b. Amounts will be $1,400 for each individual and $1,400 for each dependent of the taxpayer. The bill states that “Dependent” shall have the meaning given by IRC 152. IRC 152 states that a dependent is a qualifying child or qualifying relative. Based on this information it seems that almost any dependent will receive the $1,400 stimulus.
c. Income limits are as follows:
i. Single - $75,000
ii. Head of Household - $112,500
iii. Married - $150,000
4. Child Tax Credit
a. 17 year-old children will now be considered as qualifying children which means they will now receive the higher child tax credit rather than the other dependent credit
b. The credit will increase to $3,000 ($3,600 for children under 6)
c. The credit will be reduced by $50 for each $1,000 (or faction thereof) by which the taxpayer’s modified adjusted gross income exceeds the following amounts:
i. $150,000 – Married Filing Joint
ii. $112,500 – Head of Household
iii. $75,000 – For “any other case”
i. The child tax credit will be advanced each month by the treasury
ii. Excess credits will have to be paid back – This will be an area of concern for parents with custody agreements who have signed form 8332
iii. It also appears the wage and withholdings will be adjusted accordingly
5. Earned Income Credit
a. The age at which a taxpayer can receive the earned income credit will be lowered from 25 to 19.
b. The amounts of the earned income credits will increase
6. Dependent Care Tax Credit
a. This will be a refundable tax credit for 2021
b. The amounts of the credit will also be increased for 2021
c. Employers will be able to provide $10,500 of assistance