On February 27, 2021 the House of Representatives passed their $1.9 trillion stimulus plan. The bill was sent to the Senate and a vote is expected as early as Wednesday, March 3, 2021.
Here are some of the key provisions in the House bill:
The House bill provides individuals with a $1,400 recovery rebate credit ($2,800 for married taxpayers filing jointly) plus $1,400 for each dependent for 2021. As with the two recovery rebates enacted in 2020, the IRS will make advance payments, which the Service has been calling economic impact payments. The recovery rebate credit phases out for taxpayers with adjusted gross income (AGI) over $75,000 ($150,000 for married filing jointly) and uses 2019 AGI to determine eligibility unless you have already filed your 2020 return.
Child tax credit
The bill increases the amount of the credit to $3,000 per child ($3,600 for children under 6). The increased credit amount phases out for taxpayers with incomes over $150,000 for married taxpayers filing jointly, $112,500 for heads of household, and $75,000 for others.
Child and dependent care credit
The bill makes changes to the Sec. 21 child and dependent care credit, including making it refundable for 2021. The bill also increases the exclusion for employer-provided dependent care assistance to $10,500 for 2021.
One item not included was the Durbin/Axne proposal to exempt unemployment compensation benefits received from taxable income. It is unlikely that this proposal will be included by the Senate. However, as mentioned 2 weeks ago, Maryland passed SB496 providing a subtraction from Maryland income for certain unemployment insurance benefits.
If you have/are receiving unemployment benefits for 2020, we strongly recommend that you hold off in filing your 2020 tax returns until the Maryland changes can be implemented in your tax preparation software. If you have already filed your 2020 return, you may need to file an amended tax return to recover any Maryland state and local income tax paid on your benefits.