A Summary of Tax Provisions for COVID-19 Relief Bill

January 26, 2021 By Erik Hatch

I have been thinking the past few weeks that there have been a lot of changes this past year in the tax and business world and with the Consolidated Appropriations Act passing, I wanted to provide a short (well, short as possible) summary of some of the major provisions that I see affecting business and taxes.

In December 2020 President Trump signed into law the Consolidated Appropriations Act, 2021 which included the COVID-19 relief package. In this relief package there were several provisions that were applicable to you as a taxpayer. Here is the summary.

A-Summary-of-Tax-Provisions-for-COVID-19-Relief-Bill

Business tax provisions:

  • Paycheck Protection Plan (PPP): Most notable for businesses that applied or are applying for PPP loan forgiveness, the expenses paid by the PPP loan proceeds are deductible on the 2020 tax return.
  • Paycheck Protection Plan (PPP): For businesses that are in need, additional PPP funds are available. There is priority given to initial PPP applicants, but business whose receipts are down at least 25% when compared to the same quarter in 2019 may qualify.
  • Meals: For 2021 & 2022 business meals purchased at a restaurant are 100% deductible.
  • Employee Retention Tax Credit: For 2020 & 2021 businesses that took PPP loan funds may retroactively qualify for Employee Retention Tax Credits. There are a few steps in determining a qualified business and the amount of the credit, so please reach out if you would like to discuss applicability.
  • Leasehold Improvements: As a correction to the 2017 tax law, leasehold improvements and other qualified improvement property may qualify for a shorter tax depreciation. If you have leasehold improvements, remodels, or other real estate transactions from 2018 on, please reach out so we can discuss opportunities.

In addition to the items noted above, there are new tax provisions dealing with business interest, business losses and various other tax credits.

Individual tax provisions:

  • Charitable Contributions: For 2020 individuals that make a cash contribution of $300 can take a charitable contribution deduction while still taking a standard deduction. The cash contribution increases to $600 for married filers in 2021.
  • Charitable Contributions: For 2020 & 2021 individuals’ charitable contributions can offset 100% of income.
  • Mortgage Insurance: for 2020 & 2021 taxpayers can include mortgage insurance premiums with their mortgage interest deduction.
  • Retirement Plan Distributions: For 2020 distributions individuals can be excluded from the 10% early distribution tax if the distribution was related to COVID-19. The qualifications are very specific, so please reach out if you have a retirement distribution and are under 59 ½.
  • Stimulus Payments: In the spring of 2020 individuals received stimulus payments of $1,200. There was a second round of stimulus of $600 per person that should have been received by January 15, 2021. Many individuals did not receive these payments. If you did not receive these payments in 2020 you may qualify for a credit on your 2020 tax return.
  • Flex Spending Accounts (FSA) & Dependent Care Benefits: For 2020 & 2021 remaining balances in FSA and dependent care benefits can be rolled over to the following year.

In addition to those noted above there were many other provisions that impact individual taxpayers. If you have questions or would like to discuss your specific situation, please contact us for more information.

As a full-service accounting firm, Cook Martin Poulson has a broad range of tax and accounting professionals. In addition to income taxes and financial statement audits, our professionals can assist in specialized services such as R&D Credits, Cost Segregations, Business Valuations, business purchases and sales, 401k plans, and many more services. 

Erik Hatch

Erik Hatch

Erik is an experienced tax professional with a demonstrated history of working in the accounting industry. Over his career, Erik has broad exposure to many accounting and tax issues. He has worked closely with clients that ranged from large publicly traded corporations, corporations in their Initial Public Offering (IPO) and corporations working towards their IPO. Additionally, Erik has worked with operating partnerships, private equity partnerships, S-corporations, high net worth individuals, and trusts.

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