On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 into law. The major tax-related provisions are summarized below:
COVID-19-related Tax Relief Act of 2020:
- Additional Recovery Rebate Credit
- $600 per individual (including dependents)
- Phase out begins at Adjusted Gross Income of $150,000/$112,500/$75,000 (Married Filing Joint/Head of Household/Others)
- Advance payments will be based upon 2019 tax return
- Deferred Payroll Taxes
- The “payback period” of payroll taxes deferred during the period from September 1, 2020 to December 31, 2020 is extended from April 30, 2021 to December 31, 2021
- Educator Expenses
- Personal protective equipment, disinfectant, and other supplies used to prevent the spread of COVID-19 are treated as part of the $250 educator expense deduction
- Paycheck Protection Program and Business Expenses
- Clarified that expenses are fully deductible, tax attributes are not reduced and basis increases are not denied
- Stated that the same income exclusion and expense deductibility applies to any subsequent PPP loans as well
- Grants received under the Economic Injury Disaster Loan program no longer reduce the amount of PPP loan forgiveness
- Tax Extenders and Miscellaneous Provisions
- Sick & Family leave payroll tax credits extended through March 31, 2021
- Employee Retention Credit extended through June 30, 2021 and expanded
- Money Purchase Pension Plans now exempt from 10% early withdrawal penalty and eligible for three year income reporting
- Clarification of net operating loss carryback rules for farmers
- Meals provided by a restaurant are 100% deductible for the period beginning January 1, 2021 and ending December 31, 2022
- Charitable deduction for taxpayers who do not itemize increased from $300 to $600 for married filing joint returns
- 100% of adjusted gross income limit for charitable donations extended through 2021
Full text of the legislation can be found here: https://rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-116HR133SA-RCP-116-68.pdf
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