Media | January 5, 2021

Consolidated Appropriations Act, 2021

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:

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