2021 has brought several major changes to the tax laws that individuals and businesses need to be aware of. One of the most significant changes is the American Rescue Plan Act of 2021, which was signed into law by President Biden in March. This act includes several tax provisions that will affect individuals and businesses, including an increase in the child tax credit, a new tax credit for dependents over the age of 17, and an extension of certain tax breaks for businesses.
The American Rescue Plan Act increased the child tax credit from $2,000 to $3,000 per child under the age of 18, and $3,600 per child under the age of 6. This will provide much-needed financial assistance to families with children. Additionally, the act introduced a new tax credit of $500 for dependents over the age of 17, which will help families who provide financial support to older dependents such as college students or adult children with disabilities.
The act also extended certain tax breaks for businesses, including the Employee Retention Credit and the Paycheck Protection Program. The Employee Retention Credit, which is designed to help businesses that have been affected by the pandemic, is now available through the end of 2021. The Paycheck Protection Program (PPP) has been extended through May 31st, 2021, giving small businesses more time to apply for forgivable loans to keep their employees on the payroll.
Another major tax law change in 2021 is the increase in the federal tax rate for high-income earners. The American Rescue Plan Act increased the top marginal tax rate from 37% to 39.6% for individuals with taxable income above $518,400 and $622,050 for married couples filing jointly.
In 2022, we expect to see further changes in tax laws as the government will be looking for ways to fund the American Rescue Plan Act and other measures. One potential area for change is the estate tax, which may be increased in order to raise revenue. Additionally, there may be further changes to the tax laws related to the gig economy, as the government looks for ways to ensure that these workers are paying their fair share of taxes.
2021 has brought several major changes to the tax laws that individuals and businesses need to be aware of. The American Rescue Plan Act of 2021 has increased the child tax credit, introduced a new tax credit for dependents over the age of 17, and extended certain tax breaks for businesses. As we move into 2022, we can expect to see further changes in the tax laws as the government looks for ways to fund the American Rescue Plan Act and other measures. It's important for individuals and businesses to stay informed of these changes and consult with a tax professional to understand how they may be affected.
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