Several pandemic relief packages have been legislated and passed over the past year, and each included tax incentives as well as small business relief through government grants and loans. President Biden’s American Rescue Plan is no different.
Below are highlights of the plan’s tax and government aid proposals that will impact small businesses as well as their employees.
- Another round of direct payments to households. The plan proposes sending direct payments of $1,400 per person, although there is still debate in Congress about the income threshold to qualify for these payments.
- Expanded tax credits to help cover the cost of childcare. The relief plan expands on the currently available child tax credit and would allow a tax subsidy for those families that incur childcare costs. The plan accomplishes this by allowing a tax credit for 50 percent of the cost of childcare for those children under the age of 13, up to $4,000 for one child or $8,000 for two or more children. The credit would be fully refundable for those families with gross income less than $125,000 and partially refundable for those families with gross income up to $400,000.
- Increased child tax credits. The child tax credit would also increase to $3,000 per child ($3,600 for a child under age 6) and make 17 year-olds qualifying children for the 2021 tax year. The current law allows for a $2,000 credit for those eligible children under the age of 17. The plan also calls for the credit to be fully refundable and to be made available for those with gross income under $400,000 (married), or $200,000 for all other taxpayers. The allowable gross income thresholds are in line with current law.
- Paid sick and family leave. The plan reinstates the paid sick and family leave benefits that expired at the end of December, and are currently available on a voluntary basis to eligible employers through March 31, 2021. The benefits would be available until September 30, 2021, and would extend the benefits to employees at businesses with more than 500 employees and less than 50. The prior law under the Families First Coronavirus Relief Act allowed an exemption for those employers with under 50 or over 500 employees. The Biden plan provides for a maximum paid sick leave benefit of $1,400 per week for eligible workers. Employers with less than 500 employees would be entitled to a refundable tax credit for 100 percent of the paid leave.
- Small business loan and grant programs. The relief package designates $15 billion in grants to the hardest hit small businesses. The package also allocates up to $35 billion which could be leveraged for small business financing programs.
The Biden plan also includes a number of provisions to provide unemployment assistance and rental assistance, extend the federal eviction moratorium, increase food security, provide financial aid to state and local governments, and increase support for vaccines and testing.
President Biden’s American Rescue Plan is geared towards helping those hardest hit during the pandemic. Employees and employers alike should be mindful of the potential changes, and be aware of likely relief opportunities on the horizon.
Brian D. Kitchen is a director with Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email.
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