President Biden just signed the American Rescue Plan (hereafter ARP), known commonly as the bill sending out $1,400 stimulus checks to many Americans. However, it contains many provisions beyond that, some of which apply to content creators. We’re not going to cover the money for schools to upgrade their filtration system or the stuff to help local governments do their vaccine distribution. As almost always, this is very US specific info. Let’s dive in to it.
Stimulus
The big-ticket item for many people is the stimulus check. If no one else claims you as a dependent for tax purposes you may be eligible to get a check directly from the government. The new bill gives $1,400 per tax filer and dependent, meaning a single filer with no dependents could get $1,400 and a married couple claiming a kid as a dependent could get $4,200! Theoretically, a family of two married parents and 10 kids under the eligibility threshold could get $16,800.
One big change is that unlike previous stimulus checks, you can get one for ALL dependents. That could be a kid in college or an elderly parent. Previously only children under 17 counted.
However, there’s an income phase out for eligibility. If your adjusted gross income is below the following thresholds, you get the full check:
- Single filer: $75k
- Head of household: $112.5k
- Married filing joint: $150k
Beyond that, there is a rather quick phase out. Single filers lose eligibility at $80k of AGI, head of household at $120k, and married filing joint at $160k. Your check reduces proportionally to your income in the phase out, so having 50% of the phase out removes 50% of the check.
Enhanced Unemployment
The ARP extends the provisions enhancing unemployment benefits from the CARES act passed back in 2020. Additionally, it makes up to $10,200 of unemployment benefits received in 2020 tax free!
Essentially, it extends eligibility for a longer period of time, adds $300/week to the benefit, and makes it so the self-employed can claim the benefit where normally it cannot. As a content creator you’re self-employed, so if the pandemic heavily impacted your business you could get unemployment benefits that you’re not normally eligible for.
Strategy Ideas
This mainly pertains to the stimulus checks. The amount you get is based on your most recently available tax information, meaning if you haven’t yet filed your 2020 taxes it uses your 2019 income. Since we’re not yet at Tax Day (4/15) you might qualify on 2019 income but not 2020, or vice versa. Figuring that out could be the difference between getting a check or not. So, if you were eligible in 2019 but not 2020 you could hold off on filing your taxes to get the check. If you weren’t eligible in 2019 but were in 2020 it may help to file earlier so you show eligibility.
There is no clawback provision for the checks if you were eligible in 2019 but not 2020 and didn’t file 2020 taxes until after you received the check. It’s on you to accept whether that’s a moral hazard you’re willing to deal with.
Child Tax Credit and Dependent Care Credit
The ARP increases the Child Tax Credit for many Americans. If you’re under the income phase outs listed above for the stimulus checks and have children under age 18, your credit goes up from $2k/kid to $3k/kid. Additionally, for kids under 4, the credit increases to $3,600. Normally you could only get the credit for kids under 17, but the ARP temporarily expanded the age to 18.
One other change is the credit is temporarily fully refundable. That means if claiming the Child Tax Credit drives your tax bill negative you get the money back. Non-refundable credits can only drive your bill to $0.
The Child and Dependent Care Credit, (a way to write off some expenses you incur for dependent care while working) is expanded from $3k for one kid and $6k for 2+ kids to $8k for one kid and $16k for 2+ kids. There’s a formula to determine exactly how much you can take as a credit that is based on income that I won’t fully go in to here as it would take an entire article to cover.
Conclusion
The ARP could potentially be an important part of your short term financial decision making. It contains stimulus checks, enhanced credits for children and dependents, and enhanced unemployment.
