The Consolidated Appropriations Act, 2021 (CAA) (H.R. 133), which became notorious for its length of 5,593 pages, funds the government for its fiscal year ending Sept. 30, 2021, and makes major tax changes for individuals. Signed into law on Dec. 27, 2020, the CAA also incorporates various measures to provide certain financial assistance to individuals. The following is a brief roundup of these key changes. Most of the changes are effective after 2020, but some of them affect 2020 income tax returns.

Second Stimulus Payment

The second stimulus payment is $600 per individual, as well as $600 per eligible child. The definition of "eligible child" tracks that used for the child tax credit (i.e., a child under age 17 by the end of the year). For taxpayers without dependents, the full round 2 payment applies only if adjusted gross income in 2019 falls below set limits ($75,000 for singles, $112,500 for heads of households, $150,000 for joint filers). The full payment phases out by 5% for every $100 above the applicable AGI threshold. Thus, there is no payment when AGI reaches another threshold ($87,000 for singles, $124,500 for heads of households, $174,000 for joint filers); this threshold is lower than the one used for round 1 payments. Like the economic impact payment earlier in 2020, this new payment is a refundable tax credit (Code §6428A). However, unlike the round 1 payment, this second stimulus payment may not be used by the government or creditors as an offset to child support or any other payments (e.g., levy, attachment, garnishment, or other legal process, or the operation of any bankruptcy or insolvency law).