A new bill was passed recently and wanted to give you an update about this New Coronavirus Stimulus Package. Here is the 411 to help you make sense of it, plus a video from me.
Here is the breakdown below.
Congress has approved another round of stimulus payments which may start going out as soon as next week. Taxpayers will receive $600/individual ($1,200 for a married couple) and $600/dependent child. This money is available for individuals with adjusted gross income at or below $75,000 for single or $150,000 for married couples. For those above this income level, their amount will be reduced by $5 for each $100 their adjusted gross income exceeds the above thresholds.
The bill provides 11 weeks of $300/week emergency Federal unemployment benefits and extends the time period out to March 14, 2021.
It reduces the medical threshold on the Sch A Form from 10% back to 7.5% which should allow more medical expenses to be deductible for 2020.
It includes incentives for hiring and retaining workers by expanding the Employee Retention Tax Credit. The new credit will be a 70% credit on up to $10,000 of wages per employee per quarter to help keep employees on payroll. The credit will now be available to businesses that can show a 20% decline in gross receipts (down from 50%) and it is available for those who previously applied for a PPP Loan.
It clarifies that forgiven PPP loans will not be included in taxable income and that the PPP loans will stay on the business Balance Sheet until they have received forgiveness from SBA. When the loans are forgiven, the income will move to the P&L and be shown as Other Income: Non-Taxable Income. It also clarified that the payroll costs paid by the PPP loan funds will be deductible in 2020. (This is a major tax break for small businesses!)
It clarifies that EIDL grants will also not be included in taxable income.
It extends the refundable payroll tax credits for paid sick and family leave (from the Families First Coronavirus Response Act) through the end of March 2021.
Creates a 2nd Paycheck Protection Program (PPP) loan for smaller and harder-hit businesses if one of the 1st – 3rd quarters 2020 revenue is more than 25% less than the corresponding quarter of 2019. The business must have less than 300 employees and you must show it is necessary to support the ongoing operations of the business. FTE’s are based on the number of employees at the beginning of the 2nd loan, not the number of employees at the beginning of the 1st loan. These loans will be a 30 year loan at 3% interest.
In an effort to assist the restaurant industry – for 2021 and 2022, businesses will be able to deduct 100% of food and beverage (instead of 50%) for amounts incurred during these dates.
Energy investment tax credit for solar was extended through 2024. New %’s are: 30% through 2019, 26% from 2020 – 2022, and 22% from 2023 – 2024.
Mortgage insurance premiums will continue to qualify as mortgage interest.
For 2021 a deduction of up to $300 for single taxpayers ($600 for married filing joint) for certain cash charitable donations made during the 2021 tax year. To claim this deduction, the taxpayer must claim the Standard Deduction.
Cash contributions paid in 2020 and in 2021 are now subject to a 100% of adjusted gross income limit. This is up from 60%.