On March 11, President Joe Biden signed the $1.9 trillion American Rescue Plan Act, roughly one year after the start of a global pandemic that has claimed more than 540,000 lives, closed thousands of businesses and thrown many Americans out of work.
Still, the third relief package comes at a time of cautious optimism in the midst of a massive vaccine rollout and hopeful gains in employment numbers.
For Americans most in need, the package provides eligible individuals with a $1,400 payment ($2,800 for eligible married taxpayers filing jointly) plus $1,400 for each qualifying dependent. The stimulus phases out for taxpayers with adjusted gross income over $75,000 (or $150,000 for married filing jointly).
“Things are different now than they were for the first stimulus distribution or even the second,” said Amanda Barrett, senior consumer product manager with BOK Financial®. “The amounts and requirements are different but so are the perspectives and needs of recipients.”
When it comes to spending those funds this time, many will use a triage approach, Barrett said.
“For many, the funds are already allocated for emergent bills and immediate needs like food and shelter,” she said. “For others, the payment may go toward paying off high-interest loans or credit card balances.”
And for those who have covered their basic needs, the funds might best be used to start, or enhance, an emergency fund, she added.
Graphic created by Morning Consult.
More than 30 million adults were unable to pay their bills in January, according to a recent survey by Morning Consult. Of those, 82% were households with an annual income of $50,000 or less. And of those who couldn’t pay all of their January bills, three out of four fell short by less than $300, the survey found.
With those factors considered, Morning Consult estimates that the $1,400 stimulus payment—combined with income from a job or unemployment benefits—would enable 22.6 million adults to pay all their expenses for four and a half months.
If checks go out by mid-March, tens of millions of adults could be kept out of debt through mid-July. For the 7.5 million people who fell short of paying their January bills by at least $500, the stimulus payment is estimated to last them just under three months.
The $1.9 trillion stimulus plan contains, in addition to the $1,400 payments, many tax provisions, including a tax credit for COBRA that allows displaced workers to keep their health insurance coverage.
In addition, the legislation increases the amount of the child tax credit to $3,000 per child ($3,600 for children under six) for qualifying families. The increased credit amount also 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. Additionally, the package extends the $300 per week extra unemployment aid.