Consolidated Appropriations Act
Updated as of December 31, 2020 at 9:30 am
President Trump signed the Consolidated Appropriations Act, 2021 (HR 133, “the Act”) into law late Sunday evening December 27th. The Act addressed the much-awaited Paycheck Protection Program (“PPP”) deductibility as well as extensions for many CARES Act provisions. In addition, several tax incentives (“extenders”) set to expire December 31, 2020 were extended. The bill was over 5,500 pages and as such we have highlighted several relevant provisions for you. Please see our full write up here.
- The Paycheck Protection Program (PPP) second draw is available to smaller businesses that can show their business continues to be been impacted by the pandemic and the satisfaction of other criteria.
- Deductibility of expenses utilized for forgiveness under the PPP and PPP second draw.
- Simplified PPP forgiveness application for loans under $150,000.
- Tax deduction for 100 percent of business meals starting January 1, 2021.
- Employee Retention Tax Credit is now allowed for wages paid through July 1, 2021 with revised criteria for qualification.
- The FFCRA sick and leave pay has been extended for qualified employees until March 31, 2021. The original Act was set to expire on December 31, 2020.
- Second round of stimulus checks/direct deposits
- Stimulus payments should start being processed in the coming week(s). Stimulus payments are $600 for each individual ($1200 per couple) and $600 for children age 17 and under. The amount of the stimulus payment will start to phase out at incomes of $75,000 (Single), $112,500 (Head of household) and $150,000 (Married filing joint or surviving spouse). Treasury will base the payments on taxpayer’s 2019 tax return information.
- Enhanced unemployment benefits
- Individuals on unemployment can receive an extra $300 per week for up to 11 weeks starting on December 26, 2020. The $300 is not retroactive and is good through March 14, 2021.
- The Act extends the repayment period for deferred payroll taxes through December 31, 2021.
- Taxpayers that qualify for Earned Income Tax Credit, who have less earned income in 2020 than in 2019, can use their 2019 Earned Income to calculate their Earned Income Tax Credit.
- The bill allows taxpayers to carry over amounts in their FSA to 2021 (from 2020), and then again into 2022 (from 2021). This covers both healthcare and dependent care FSAs.
- Starting in 2021, the Tuition and Fees Deduction has been eliminated. It has been replaced with a higher phase-out limit of the Lifetime Learning Credit.
- Starting in Tax Year 2021, an individual who does not itemize deductions can also get an above-the-line deduction of $300 per return ($600 for a joint return) for cash donations.
The Act extended many expiring tax provisions, typically known as the extenders. Many of these were extended for one year only including:
- Credit for electricity produced from certain renewable resources
- Nonbusiness energy property credit
- Qualified fuel cell motor vehicle rules for alternative motor vehicles credit
- Energy efficient homes credit
- Excise tax credits relating to alternative fuels
- Treatment of mortgage insurance premiums as qualified residence interest
- Credit for health insurance costs of eligible individuals
The following provisions were extended through 2023:
- Energy Credits
- Residential energy efficient property credit
The following provisions were extended through 2025
- New Markets Tax Credit
- Work opportunity tax credit
- Employer credit for paid family and medical leave (section 45S)
- Empowerment zone incentives (with modifications)
- Seven-year recovery for motorsports entertainment complexes
- Exclusion for certain employer payments of student loans
The following expiring tax provisions were made permanent:
- Energy Efficient commercial buildings deduction
- 7.5% medical expense deduction floor
Please check our COVID-19 Resources page or consult with your MHCS adviser for the latest updates on this evolving matter and as more information becomes available.