At the very end of December 2020, President Trump signed the Consolidated Appropriations Act, 2021 (CAA, 21) into law. This included the second draw of PPP loans, stimulus checks, plus a list of tax deductions, credits, and extensions.
In order to best assist you in sifting through the mountain of available information, we have curated this list of headlines and external resources. This is not a comprehensive list resulting from CAA, 21. We recommend skimming through the headlines below, then either clicking through or contacting your tax advisor about the topics which apply to your situation. Call or email us for further advice, direction, or questions.
2021 Economic Impact Payments (EIP), also called Stimulus Checks
The second round of EIP checks has begun to be distributed. These are in addition to the 2020 payments. This link answers most questions about EIPs including https://www.irs.gov/coronavirus/second-eip-faqs
- Calculating your payment and phaseouts based on income: IRS calculation
- Who is eligible: IRS eligibility list
- How to get a payment: IRS fact sheet
- If you haven’t filed for 2019: IRS instructions
- If you aren’t required to file: IRS instructions and circumstances
PPP Second Draw and Updates
CAA, 2021 clarified that expenses paid from PPP loans are deductible, reversing the previous IRS position. Accounting Today source- Forgiveness of PPP debt is excluded from gross income: WHH recommended forgiveness accounting
- Entities meeting these requirements will be eligible for a second draw:
- 300 or fewer employees per location
- Have already or will have used the full amount of the first draw
- Demonstrate at least a 25% reduction in gross receipts
- SBA source
- Loan amounts: second draw amount may be up to 2.5 times the average monthly payroll costs or up to 3.5 times for borrowers in the hospitality or food service industries.
- Simplified certification: second draws under $150K may use this easier forgiveness process.
- PPP and EIDL will be available through December 31, 2021
COVID Tax Provisions for Individuals
CAA, 21 Deductions
- For educators: $250 educator expense deduction applies to PPE, other COVID related supplies.
- For medical expenses: 7.5% of AGI “floor” on medical expense deductions is made permanent.
- For mortgage insurance premiums: deduction extended by one year.
- For charitable contributions: Extension through 2021 of above-the-line charitable contribution deduction; increased penalty for abuse.
- Extension through 2021 of allowance of charitable contributions up to 100% of an individual’s adjusted gross income.
CAA, 21 Exclusions from income
- Exclusion for benefits provided to volunteer firefighters and emergency medical responders made permanent.
- Exclusion for discharge of qualified mortgage debt is extended, but limits on amount of excludable discharge are lowered.
- Extension of exclusion for certain employer payments of student loans.
CAA, 21 Tax credits
- Individuals may elect to base 2020 refundable child tax credit (CTC) and earned income credit (EIC) on 2019 earned income.
- Health coverage tax credit (HCTC) for health insurance costs of certain eligible individuals is extended by one year.
- New Markets tax credits extended.
- Nonbusiness energy property credit extended by one year.
- Qualified fuel cell motor vehicle credit extended by one year.
- 2-wheeled plug-in vehicle credit extended by one year.
- Residential energy-efficient property (REEP) credit extended by two years, bio-mass fuel property expenditures included.
Disaster-related changes in retirement plan rules
- 10% early withdrawal penalty does not apply to disaster distributions from retirement plans.
- Increased limit for plan loans made because of a qualified disaster.
By: Kevin Hinton, CPA
Partner
