On Sunday, December 27, 2020, President Donald J. Trump signed into law a mammoth piece of legislation known as the Consolidated Appropriations Act. The 5,593 page bill encompasses the federal government’s annual spending budget for fiscal year end September 30, 2021, along with a host of tax provision extensions and a $908 million economic relief bill to help American individuals and businesses still struggling financially due to the ongoing pandemic. Some of the more notable provisions in the bill are summarized below.
RELIEF FOR INDIVIDUALS
- Additional $600 stimulus checks for qualifying taxpayers and dependents – in short, if you qualified for the first round of $1,200 payments, you’ll qualify again for the second round. Certain income limits still apply and qualifying dependents are still limited to those under the age of 17.
- The additional $300 federal unemployment insurance supplement will continue through March 14, 2021, and the coverage period to receive unemployment benefits is extended for up to 50 weeks through April 4, 2021 for all claims in place prior to March 14, 2021.
- The educator expense deduction can now include amounts spent after March 12, 2020 on personal protective equipment, disinfectant, and other supplies used to stop the spread of Covid-19. This deduction is limited to $250 per qualified educator on a return.
- For employees who participated in the optional payroll tax deferral created by President Trump back in August, the repayment period for those deferrals was extended from April 30 to December 31, 2021.
- The new 2020 above-the-line deduction of $300 for cash donations to qualified charities allowed for those who take the standard deduction on their tax returns has been extended through 2021.
- Similarly, the new 2020 provision allowing those who itemize to deduct their qualified contributions up to 100% of their adjusted gross income has also been extended through 2021.
- For 2020, taxpayers may calculate their Earned Income and/or Child Tax Credit using either their 2019 or 2020 income to maximize their credit, so long as their income was lower in 2020.
RELIEF FOR BUSINESSES
- Perhaps most importantly, the new law makes it clear that business expenses paid using funds from a Paycheck Protection Program (“PPP”) loan will be deductible for federal income tax purposes.
- PPP loans under $150,000 will only require a single-page certification document to qualify for full forgiveness.
- Creation of a PPP Second Draw program will allow certain businesses to qualify for an additional forgivable loan. (We’ll be going into more depth with this new program in a separate release.)
- The forgivable grant advances under the Economic Injury Disaster Loan program will not be considered taxable income. This program was also extended through December 31, 2021.
- Any subsidies provided to businesses related to their existing SBA loans will not be considered taxable income.
- Certain payroll tax credits established under the Families First Coronavirus Response Act (“FFCRA”) have been extended through March 31, 2021. The employee retention tax credit was also expanded to make it easier for more businesses to qualify and increase the amount of credit available.
- For calendar tax years 2021 and 2022, a full 100% deduction will be allowed for business meals that are provided by a restaurant.
Additional information on the new legislation can be found below:
If you have any questions about how the new legislation might impact your personal financial or tax situation, please don’t hesitate to reach out to our offices at (770) 532-9131.