Tax Changes In COVID-19 Relief Legislation

President Biden signed a $1.9 trillion COVID-19 relief package into law on March 11, 2021.

In addition to providing stimulus checks, increased unemployment assistance, funding for vaccine distribution and COVID-19 testing and research, and aid to state and local governments, the American Rescue Plan Act makes several important changes to the tax code:

• It increases for one year the child tax credit from $2,000 to $3,000 per child (and $3,600 per child under six), and makes the credit fully refundable for 2021. (The Tax Cuts and Jobs Act (TCJA) had made the child tax credit refundable up to $1,400 per child for taxable years 2018-2025.)
• For 2021, it increases the earned income tax credit from a maximum of $538 to $1,500, and expands eligibility for the credit to all childless taxpayers over age 19, with the exception of full-time students between the ages of 19 and 25. Previously, only childless taxpayers between the ages of 25 and 65 could claim this credit.