Here is a brief summary of the bill.
Federal Tax break extenders. Many of the “traditional” tax extenders are extended for one year (through 2021) or more, They include:
- $500 energy-efficient home improvement credit.
- Mortgage insurance deduction.
- Tuition deduction is repealed (starting in 2021) but the Lifetime Learning Credit income limits are increased to help offset this (starting in 2021).
- 7.5% floor to deduct medical expenses extended permanently.
- Recovery rebates for individuals. To help individuals stay afloat during this time of economic uncertainty, the government is sending up to $600 payments to eligible taxpayers and $1,200 for married couples filing joint returns. An additional $600 additional payment is being sent to taxpayers for each qualifying child dependent under age 17 (using the qualification rules under the Child Tax Credit). The payment phases out for higher income taxpayers. The phaseout begins at modified adjusted gross income of $75,000 for single taxpayers and $150,000 for married joint taxpayers.
- 2020 Child Tax Credit and Earned Income Credit can be based on 2019 income (if helpful).
- $300 Charitable Deduction for non-itemizers (taking standard deduction) is extended to 2021. Starting in 2021 married filing joint taxpayers will be able to deduct $600.
- PPP Loans & EIDL Grants are not taxable. Expenses paid with PPP loans are deductible. More expenses qualify for PPP forgiveness.
- New PPP Loans Are Available. If your revenue went down by 25% or more in any quarter of 2020 you can apply for a new PPP loan.
- Simplified PPP Loan Forgiveness Application. If your PPP loan is under $150,000 then you can sign a one page form and don’t have to attach many pages of receipts, etc.
- Payroll Credits for Paid Sick and Family Leave. The credits for sickness and family leave due to Covid-19 are extended through March 31, 2021.
- Employee Retention Credit. The credit has been extended to June 30, 2021. The requirements have been lowered—now you only need a reduction in revenue of 20%. And you can qualify even if you received a PPP loan (but can’t use expenses used for PPP loan forgiveness).
- Business Meals are 100% deductible for 2021 & 2022. They must be obtained from a restaurant (dine-in, takeout, or delivery). Need to have receipts, names, purpose, etc.