Covid Relief Bill – Significant Tax Relief for Individuals and Businesses
Well, it’s like an early Christmas morning, rolling down the stairs to see what Santa has left everyone in the tax break. There are plenty of goodies for everyone – businesses, individuals, charities, and especially for those who love their wine, spirits, and beer (Santa is caring).
A useful summary of all tax provisions is HERE
While there is understandably a lot of emphasis on P3 and deductibility (discussed below) and expansion – as well as the $ 600 per person check (elimination starts at $ 75,000 per person; 150 $ 000 joint deposit) – the top prize (or at least the overlooked price) I would suggest is the Extended Job Retention Credit.
Job retention credit
The job retention credit was the forgotten child in the original CARES law – it is now back – and much more important. Employers are going to want to take a close look at this robust provision that will provide significant help in keeping employees on the payroll.
The provision lasts 6 months from January 1, 2021 and increases the credit rate from 50% to 70% of qualified wages. Eligible salaries can be as high as $ 10,000 per quarter (instead of $ 10,000 per year). The new provision extends business eligibility by reducing the required year-over-year decline in gross revenue from 50% to 20%. The provision increases the maximum number of employees from 100 to 500. In addition, the provision has a host of bells and whistles that essentially make it easier to qualify for and benefit from the new and improved retention credit. Business owners need to take a close look at whether they’re eligible – and whether they’ve looked before when the CARES Act was passed – they need to look again.
PPP loan remission
The biggest relief probably goes to business owners (and their accountants) with Congress making it clear that for those whose business owners have gotten their P3 loans canceled – after (a surprising amount) of gnashing , Congress clarified that deductions are allowed for otherwise deductible expenses paid with forgiveness PPP Loans. Thanks to a large number of elected officials (and in particular the Senator Cornyn for holding on to it. It has been equally important to accountants who have been scrambling to figure out how to file on behalf of their clients. The effective date is that of the first adoption of the CARE law.
Extensions / Permanence
The tax provisions include the sustainability of a number of tax extensions, including:
Article 179D – encourage green and energy efficient design of public buildings – a huge benefit for architects, engineers and contractors. Section 179D is made permanent and the benefit is extended (coupled with a higher barrier to energy efficiency for designers). This provision encourages designs that result in improved energy efficiency and energy independence, while reducing energy costs for the government. A green victory for taxpayers and designers. A significant number of other energy supplies have been extended or made permanent – a good day for wind and solar.
Wine, liquor, spirits, beer. A number of temporary tax cuts in the alcohol industry have been made permanent. Cheers! But beware: no tax break for smuggled or illegally produced alcohol (where’s the love for bath gin and smugglers?).
New Market Tax Credits – 5 year extension
WOTC – 5 year extension
Empowerment Zones – 5 year extension. . . and much more
Exclusion of employer repayment of student loans (up to $ 5,250) – tax free – 5 years
NOTE: The five-year extension aligns everything with 2025, when a significant number of tax provisions in the tax reform bill also expire. Implementation of the fiscal gotterdammerung.
A number of other items are granted a one-year extension until 2021, including: the Indian Job Credit; depreciation of racehorses; 2-wheel socket in electric vehicles; etc.
The meal deduction, which has already attracted attention – allows a 100% deduction for expenses for business meals and beverages – including take-out or delivery meals (the dashboard must appear on the very good Santa’s list) – for meals paid for in 2021 or 2022.
Charities (and more importantly – those in need they serve) will see a modest advantage for the non-determinants that can deduct contributions for 2021 ($ 300 single / $ 600 married) and the expanded limits for the AGI deduction. continued into 2021. Now if we could just get Congress to end the storage billions of dollars in charitable dollars. . . that would be really meaningful.
Generally speaking, the resolution of all these tax extensions is an advantage for the new administration. There’s always an argument that a ‘better deal’ can be had if you wait for the new administration to arrive – but I can’t imagine the Biden team really wanting to take care of all this taxation when they do. will walk through the door for the first time. . It’s good to have cleaned up the bridges.
Santa Claus – via the US Congress – has given plenty of tax breaks – with virtually no coal in any storage.