Financial Planning | March 11, 2021

The $1.9 trillion COVID relief package signed by President Biden on Thursday isn’t aimed only at lower-income and middle-class individuals. Advisors say that many upper-middle-class earners and even the mass affluent can potentially qualify for a portion of the tax breaks or direct cash payments.

Here’s a cheat sheet to the main personal finance elements tucked into the final American Rescue Plan. Checks are due to start flowing within days of Biden signing the bill.

$1,400 stimulus checks

What advisors are saying:

Mark Triplett, the CEO and founder of Triplett-Westendorf Financial Group in Ankeny, Iowa, says that for the $1,400 check, “it’s important to realize the income requirements have changed and will phase out faster than previous rounds.” He recommends that people who get one pay overdue bills, whittle down down high-interest debt, and then make contributions to an existing traditional or Roth IRA before April 15.

Bigger child tax credits = serious money

What advisors are saying:

David Medina, a CFP and the founder of Stewardship Financial in Arcadia, California, called the temporary $3,600 child tax credit for children under 6 a “staggering” one-off sum that can be put to work in a traditional or Roth IRA.

“Younger families stand to benefit immensely,” says Karen Altfest executive vice president of Altfest Personal Wealth Management, an RIA in New York. “For 2021, certain families could see a massive decrease in their tax bill.”

CFP Cheryl Costa, founding principal of Woodside Wealth Management in Framingham, Massachusetts, says that under the new bill, taxpayers earning $440,000 or more will get no child tax credit whatsoever. Previously, those taxpayers were able to claim a partial credit.

Extended unemployment benefits

For individuals or households that made less than $150,000, there’s no federal tax on the first $10,200 of their unemployment benefits received in 2020. All other unemployment benefits are taxable at ordinary rates, including those received this year.

A clutch of regular and special unemployment benefits are extended to Sept. 6. That covers people now getting or expecting soon to receive:


What advisors are saying:

“The big change is the tax-free aspect to unemployment benefits,” says Robert Seltzer, a CPA and personal financial specialist (PFS) in Los Angeles, California. While few of his clients claimed those benefits in prior tax seasons, he calls 2020 “a unique year when a far number greater of my clients, who are in the entertainment industry did.”

Costa says that “it appears that if a couple is filing a joint return and both of them were unemployed, each of them could exclude up to $10,200.”

Medina says that the tax exemption for $10,200 in unemployment benefits “could impact middle income and mass affluent families given that over 30 million Americans collected unemployment in 2020.”

Relief on some student loans

What advisors are saying:

Costa calls this relief “the granddaddy of all the provisions.” While in prior years, forgiven student loan debt was taxed as ordinary income to the individual, “now this debt will not be taxed. This is a big deal for the people who have hundreds of thousands of dollars in debt forgiven.”

More affordable health insurance
COBRA temporarily becomes a lot more affordable. For those who’ve lost their employer-paid health insurance due to layoffs or reduced weekly hours, the federal government will pay their entire COBRA premium for April through September.

Obamacare becomes more affordable. People who bought an Affordable Care Act policy instead of opting for the costly COBRA will see their premiums cost a maximum of 8.5 percent of their income through 2022.

What advisors are saying:

Congress may make some of the changes, including the bigger Child Tax Credit, permanent, writes Jeffrey Levine, a CFP and CFA at accounting and financial advisory firm Kitces, in a note. That means that “the potential for even more legislation-driven tax planning opportunities for clients likely through the remainder of 2021!”

Lynnley BrowningReporter, Financial Planning

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