How Biden’s COVID Relief Plan Affects The Investor

Recently, President Biden signed the American Rescue Plan, a $1.9T stimulus package to keep the economy moving forward amid the pandemic that the country is in.

American Rescue Plan

Here Is What We Are Getting…….

Here is a review of some of the main benefits we can expect in the coming months that will impact investors.

Stimulus Check

$1,400 per eligible person stimulus checks have been made available. People who are either single making less than $75,000, head of household making less than $122,500 or married couples filing jointly making less than $150,000 qualify for the full amount of stimulus checks.

If a single individual earns more than $75,000 the payments gradually phase out and receive a partial payment. At $80,000, a person will not receive a stimulus check.

If a married couple filing jointly earns more than $150,000 the payments also gradually phase out and can receive a partial payment. At $160,000, a married couple filing jointly will not receive a stimulus check.

On top of that, all dependent individuals, including seniors and college students, can also receive the full amount of the stimulus package. For example, a married couple filing jointly with 2 dependent children and meet the income requirements can receive $5,600 in stimulus money!

Tax Credits

Several tax credits were enhanced under the latest plan.

For example, the Earned Income Tax Credit (aka Working Americans Credit) was increased from $543 to $1502. This credit is meant to be a refundable tax credit for low-income working individuals and couples, especially those with children.

The tax credit operates on a sliding scale meaning that hard working parents with more children to support, but less means to support them, qualify for a higher Working Americans Credit.

Another benefit that is not talked about very much but can be just as significant as the stimulus checks is the Child Tax Credit adjustments. The Child Tax Credit was raised from $2,000 per child to $3,000 per child for children between the ages of 6-17 and $3,600 per child for children under the age of 6.

The good news about this credit is that a person does not need to wait until filing taxes to receive the credit. Starting in July, half of the aggregate tax credit earned by an individual or family will be paid in advance directly into a person’s bank account on a monthly basis until December 2021!

In other words, for qualified individuals and families, this will be an additional financial boost. For example, a married couple with 2 children, say ages 6 and 8, can expect to receive $3,000  worth of payments between July 2021 and December 2021 (half of the $6,000 earned). This is approximately another $500 a month earned for the 2nd half of this year!

Lastly, The Child and Dependent Care Tax Credit (CDCC) is another hidden benefit not brought up but has significant consequences. Essentially, this is an existing tax credit that has been expanded to make more people eligible and increasing the total credit.

The total credit is now $4,000 for 1 individual or $8,000 for 2 or more individuals if your adjusted gross income (AGI) is $125,000 or less. Scaled down payments are also eligible for individuals making in excess of $125,000. Read this article I found to get more details.

Who qualifies?

Qualifying individuals are defined as under-13 age child, stepchild, foster child, brother/sister, stepsibling, or a descendent of any of these. The individual must have lived in your home for over half the year and must not have provided half of his or her own support. A handicapped spouse or handicapped dependent who lives with you for over half the year also qualifies.

Typical expenses that are eligible for a tax credit include day-care, nanny services, or nursery school. Costs for overnight camps do not qualify. However, nothing was mentioned about day camps for kids this summer (may be eligible? … I’m checking it out to see if it qualifies! 😊) If you hear anything about this, please send me comments at this link or post comments on my Facebook page here…… I’m dying to know and plan to research more soon!

Cost for private schools does not qualify but costs for before-school and after-school programs CAN qualify! Costs for domestic help can even qualify providing at least part of the cost is towards the care of the qualifying individual.

Here’s the best part….. this tax credit will refundable! In the past, this tax credit was non-refundable meaning it can only be used to offset a filer’s federal income tax liability. In other words, no liability, no credit. Not this year, it is refundable. The article did not go into detail as to HOW this payment will be made (i.e. like the Child Tax Credit did). I’m planning on consulting my accountant for guidance and recommend you do too.

Here is the not-so-good news. In order to claim the credit, taxpayers identified as married filing jointly must have both adults working. If only 1 adult is working, you do not qualify. However, there is a caveat……..

If your spouse has no earned income AND is a full-time student or disabled, he or she is deemed to have imaginary monthly earnings of $250 for 1 qualifying individual and $500 for 2 or more qualifying individuals. Under this exception, you can potentially claim the CDCC.

Small Business Support

The American Rescue Plan will provide emergency grants, lending, and investment to small business for the purposes of rehiring and/or retaining workers as well as the purchase of health / sanitation equipment to keep workers safe.

It also includes a Small Business Opportunity Fund to provide growth capital to main street-type small businesses in economically disadvantaged areas including minority-owned businesses.

Through the State Small Business Credit Initiative, legislation allocated funding for state governments to leverage private capital and make low-interest loans to help small businesses recover.

Check out the complete details here.

How To Make the Most Of This Opportunity?

Let’s add up how much potential money is being provided by the American Rescue Plan (assumes married filing jointly with 2 dependents under 13):

Stimulus Money – $5,600

Child Tax Credit – $3,000

Child / Dependent Care Tax Credit – $8,000

Total   $16,600

Now the $16,600 question is: How to take advantage of this great opportunity?

Here are a few suggestions:

Pay Down Debt

If you are behind on bills and struggling to make ends meet, use the stimulus money for what it was intended for, pay off your outstanding bills.

If one of the fortunate ones who can still work thru the pandemic, consider making a major payment toward outstanding debt.

Credit card bills through the roof? Student Loans out of control? Pay them down.

In this article, I talk about the psychological benefits and other benefits of paying down debt. Check it out!

American Rescue Plan

Build Up Emergency Fund

Did the pandemic drain cash reserves? Consider putting this stimulus money toward replenishing your emergency fund.

Ensuring a sufficient emergency fund of at least 6 months of expenses has several benefits:

First off, unexpected emergencies will come up and not being prepared can put you deeper in debt. An emergency fund acts like a safety net that provides the confidence and peace of mind needed to overcome life’s unexpected events.

Second, having an emergency fund prevents future debt from accruing. The reality is that without an emergency fund the debt must get paid and choices are limited.  The 2 most likely scenarios for paying off the emergency are either getting a loan from family or using a credit card to pay off the debt. Doing this amplifies the debt owed and does not benefit you in the long run.

Third, having a sufficient emergency fund enables working towards long-term financial goals. The reality is that financial flexibility enables choices. Choices are always good! 😊

A person can treat themselves to a weekend getaway. They can put a down payment on a home. Even invest the surplus money in the stock market, rental properties, and much more!

Having an emergency fund enables good things to happen!

Start a Roth IRA

If your debt is manageable and have a solid emergency fund, what is the next thing to fortify?…….. Retirement

To achieve the goal of financial independence involves 3 things: earning, saving, and investing. To achieve this goal faster than most requires being excellent in at least 2 of these categories. Consider starting a Roth IRA to bolster retirement savings.

Since the stimulus money coming from the government is tax-free, it only makes sense to re-invest the money in a Roth IRA. Normally, a Roth IRA enables the investment money to be taxed now and withdrawn for future use at a tax-free rate. In other words, a person pays taxes on “the seed” not “the tree”.

Using stimulus money that is already tax-free for retirement investing and then later withdrawn tax-free is a win-win! 😊

Start a Business

Have the urge to go off on your own? Want to be your own boss? Then try starting a business. For a lot of reasons, during a recession (or a pandemic) can be the best time to start a business.


Here are a few reasons:

First off, established business will be struggling to survive. Businesses that have been experiencing high turnover and lower sales may not be covering the overhead. On the other hand, a new business can run leaner and be more agile since it is learning to survive in a tough environment. This can enable undercutting of the competition.

Second, when a business is first setup, it can be challenging to compete against the established competition. Customers can be reluctant to buy from a company without a proven track record even if the price undercuts the competition.

However, during a recession, all that goes out the window. This is because people tend to put saving money as paramount. So long as your product is of sufficient quality, the lack of an established track record will not be a barrier to new sales.

Lastly, starting a business during a recession is flat out cheaper to do. This is because other businesses will be struggling to find new clients and a new business can run leaner and cheaper than established businesses. Also, recessions mean that unemployment is high, and people are desperate to find work. This allows for a great opportunity to negotiate better terms and conditions for capital, equipment, utilities, and labor that will have benefits once the recession is over and your business is more established.

Buy An Insurance Policy

Have kids yet no estate plan? Now would be a good time to set one up. Having an estate plan has several advantages. It gives peace of mind knowing that your wishes will be taken care of and your most prized possession, your spouse and kids, have been setup for success in the event of your demise.

An estate plan lets people know what your wishes are with the use of your assets in the event of demise.

Knowing your family is protected can unlock your full potential and make you more productive today!

However, a vital component of a good estate plan that people either neglect or don’t realize how much it is truly needed is life insurance.

Life insurance is a financial safety net that can be purchased in the event of your demise which helps loved ones reliant on you to produce income. Life Insurance policies have many other benefits too that can be enjoyed while still alive depending on what type of policy is purchased.

Don’t have a spouse or family? Don’t let that stop you from obtaining life insurance. Life insurance is cheapest while a person is young and relatively healthy. As people get older, life insurance premiums can go up significantly…. Lock it in now while you’re still young!

I talk about life insurance policies here in more detail…. Check it out! 😊


The American Rescue Plan offers a multitude of advantages for investors that is not readily apparent in the $1.9T stimulus package. Take the time to research its benefits and how it impacts you…. You’ll be glad you did! 😊

Live the Life You Love, Want, and Deserve!