As of this writing, the Consolidated Appropriations Act, 2021 awaits the President's signature to become law. Some of the key tax provisions of the legislation are:
RECOVERY REBATE PAYMENTS FOR INDIVIDUALS
$600 per person. Phaseout begins for individuals with adjusted gross income above $75K for Single filers, fully phased out by $87K.
For joint filers- Phaseout begins at $150K, fully phased out at $174K.
Treasury will base payments on information from 2019 returns.
If the payment exceeds the amount that they would have been eligible for based on their 2020 return, the excess will not be required to be repaid. If the amount of the credit determined on the taxpayer's 2020 tax return exceeds the amount of the recovery rebate payment received, the difference will be available as a refundable tax credit.
PAYCHECK PROTECTION LOANS (PPP LOANS)
The bill clarifies that taxpayers will be permitted to take deductions for otherwise deductible expenses paid with PPP Loan proceeds, even if the loan is forgiven. The tax basis of the borrower's assets will not be affected.
Provides more funding for a second round of PPP Loans up to $2 Million
For Previous PPP Loan recipients:
First time borrowers:
Potentially forgivable like the initial PPP loans. Must spend 60% of the funds on payroll over a covered period of either 8 or 24 weeks.
Simplified forgiveness process for loans of $150K or less.
DEFERRAL OF PAYROLL TAXES
For employers that may have deferred social security withholdings from September 1, 2020 through December 31, 2020, the withholding of the deferrals is now extended to December 31, 2021 (previously April 30th 2021).
Adds 11 weeks of $300 per week emergency unemployment benefits.
Medical expense income threshold to remain permanently at 7.5%.
Energy Efficient Commercial Buildings Deduction made permanent.
AOTC and Lifetime Learning Credit will be subject to the same phaseout.
Employer credit for paid sick and family leave has been extended to 3/31/21.
Employee retention tax credit extended to 6/30/21.
Temporary 100% business expense deduction for meals, as long as the expense is for food or beverages provided by a restaurant. Effective for expenses incurred after 12/31/20 and expires 12/31/22.
Through 2021 MFJ taxpayers may take an above the line deduction for charitable contributions in the amount of $600, for single and other filing statuses, the above the line deduction is $300.
President Trump has indicated that he will not sign the legislation, instead, he is instructing congress to increase the amount of the stimulus payment from $600 to $2,000. This is only a brief summary of some of the aspects of the legislation, we will continue to review and digest to provide more details. If you have any questions about the new legislation, please contact us.