Which tax benefit may be affected by the reduced Federal adjusted gross income under the American Rescue Plan Act of 2021?

The standard deduction is a set dollar amount that reduces the income on which you are taxed, and it is influenced by federal adjusted gross income (AGI). By reducing the Federal AGI, the American Rescue Plan Act of 2021 may result in individuals qualifying for a higher amount of other tax benefits, including the standard deduction, which could lead to a lower taxable income. This deduction is available to all taxpayers and is particularly significant for those who do not itemize their deductions.

While the other options may also have implications under the tax law, their direct relationship with the federal adjusted gross income does not play the same pivotal role as it does with the standard deduction. For example, while the California Earned Income Tax Credit and the California Child Tax Credit may be influenced by income levels, the specific mechanics of how the standard deduction operates in relation to AGI make it the most directly affected benefit in this context. The California Sales Tax Deduction does not rely on adjusted gross income in the same manner, further differentiating these benefits from the standard deduction.