After months of negotiating, the U.S. Congress finally passed the $1.9 trillion stimulus bill proposed by President Biden yesterday. The bill was signed officially into law by President Biden this afternoon, making it one of the largest pieces of legislation ever to pass in the U.S. The most notable portion of the bill is that it provides $1,400 stimulus checks to most Americans, but in addition to direct payments, it includes several important unemployment provisions that could help you save thousands of dollars. Here’s what you need to know.
Unemployment Boost Extended to September
Since March of 2020, the federal government has been providing weekly supplements to unemployment benefits. The American Rescue Plan includes additional unemployment boosts that will provide $300 extra per week from March 14th (when the boost from the last bill expires), until September 6th. If benefits begin on time, unemployed people can expect $7,500 in extra unemployment funds to hit their bank accounts over the course of the spring and summer.
The original bill proposed $400 extra in unemployment, but the amount was knocked down in negotiations. The first stimulus bill, the CARES Act, provided $600 extra in unemployment. While the American Rescue Plan boost is much smaller, it will still provide an important lifeline for the millions of Americans on unemployment.
$10,000 in Unemployment Income is Now Tax-Exempt
Many people don’t realize that for the purpose of their taxes, unemployment benefits are considered income by the IRS. Most states don’t withhold taxes on unemployment the way that employers do, leaving people vulnerable to a large tax bill at the end of the year. However, the new stimulus package has solved this issue by making the first $10,000 received in unemployment tax-exempt for everyone whose income is less than $150,000 per year. Above the $10,000 mark, unemployment benefits will be taxable, but due to other tax credits and deductions (like the Child Tax Credit, also included in the bill, and the standard federal deduction), many people will pay little, if anything, in taxes on their unemployment.
Without this tax provision, millions of people would likely have had to return their $1,400 stimulus checks to the IRS as taxes, but under the bill, the average person on unemployment will save over $1,000 on their taxes. As jobless Americans attempt to cover expenses like food, housing and healthcare, high tax bills would be devastating for many.
Unemployment Extended to 53 Weeks
Every state has its own rules about how long people can remain on unemployment, ranging from 12 weeks to 30 weeks. The CARES Act extended unemployment to 23 weeks (many states chose to provide unemployment benefits for longer), and the American Rescue Plan has further extended benefits to 53 weeks. This will allow people who have been unemployed for the duration of the pandemic to continue receiving the benefits that they need.
The American economy is recovering slowly and beginning to add jobs, but in the meantime unemployment benefits provide essential assistance for those whose employers remain closed.
Conclusion: The American Rescue Plan Will Help the Unemployed
Vaccine progress and dropping caseloads are allowing many parts of the U.S. to begin a return to normal, but recovery could still take months. As millions work to get back on their feet, the new $1.9 trillion package will help those receiving unemployment to avoid a hefty tax bill for 2020 and continue getting assistance as needed. $1,400 direct payments will likely be sent out this weekend, and the unemployment boost should start next week. You can keep up with the latest in stimulus news on the Skip App (free on the App Store or Google Play), and track progress on funding distribution for small businesses and individuals.