As part of the American Rescue Plan Act, signed into law on 11th March 2021, part of it’s aim towards individuals is to provide a $1,400 refundable tax credit to individuals ($2,800 for joint filers) with up to $75,000 in adjusted gross income (or $112,500 for heads of household and $150,000 for married couples filing jointly). It also provides $1,400 for dependents (both child and non-child).
As with most credits, there is a phase out threshold and those with incomes above $80,000 (or $120,000 for heads of household and $160,000 for married couples filing jointly) will find that the credit is phased out entirely.
However, for income between $75,000 and $80,000 (or $112,500 and $120,000 for heads of household and $150,000 and $160,000 for married couples filing jointly), the credit is reduced.
The credit will be paid out in advance like the Economic Impact Payments previously provided under the CARES Act and the COVID-related Tax Relief Act.
For this purpose, the IRS will use the most recent adjusted gross income in its system (2020 or 2019). If an individual qualifies for a larger payment using 2021 income, the difference will be claimed as a credit on the individual’s 2021 return itself.