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Consolidated Appropriations Act, 2021

The act was signed into law by the President on December 27, 2020, we summarized some of the information to help you understand the changes.

For the full 5,596 page Consolidated Appropriations Act, 2021, click here.

• Second round stimulus payments for individuals — $600 for individuals making up to $75,000 per year, $1,200 for couples making up to $150,000 per year, and a $600 payment for each dependent child

• Enhanced unemployment benefits of $300 per week until mid-March

• Extends above the line charitable deduction for 2021 and increases the maximum amount that may be deducted to $600 (married couples filing a joint return) or $300 (non-married filers or married filers filing separately)

• Extends the deduction for qualified mortgage insurance premiums for 2021

• Allows for 2020 early distributions from retirement plans of up to $100,000 without being subject to the 10% penalty that applies to early retirement distributions

• Medical expense itemized deduction adjusted gross income (AGI) floor stays at 7.5% instead of going up to 10%

.• Deduction for qualified tuition and related expenses repealed and replaced with increased income limitation for lifetime learning credit

• For businesses, there is a temporary 100% deduction for business food and beverage expenses provided by a restaurant that are paid or incurred in 2021 or 2022

• Repeals the requirement of deducting an EIDL grant from the PPP forgiveness amount;

• Allows for tax deductibility of PPP expenditures

The PPP loan and grants will be still administered by the SBA and bank officers and more guidelines will be forthcoming regarding the new application process, please ask your banker. If you apply, the SBA and banks will determine the loan amount and how to apply for forgiveness.

Small business assistance, including additional PPP loans and Emergency Injury Disaster Loans, program extended through March 2021.

• To be eligible, the applicant must demonstrate that it had gross receipts during the first, second, third or fourth quarter of 2020 that were at least 25% lower than the gross receipts of the applicant during the same quarter in 2019

• Eligible borrowers may receive a second PPP forgivable loan for the hardest-hit small businesses and nonprofits with 300 or fewer employees

• Allows for small businesses in the restaurant and hospitality industries to receive larger awards of 3.5 times average total monthly payroll, rather than 2.5 times;

• Adds PPE expenses associated with outdoor dining, and supplier costs as eligible and forgivable expenses;

• Simplifies the forgiveness process for loans of $150,000 and less, SBA will develop a new application

• The Act adds several new categories for authorized uses of loan proceeds. They include:

     o Payments for business software and cloud computing services that facilitate certain business operations;

     o Uninsured costs related to property damage and vandalism or looting due to public disturbances during 2020;

     o Supply chain expenditures for goods that are essential to the operation of the applicant’s business and which are made pursuant to a contractual commitment; and

     o Operating and capital expenditures to facilitate the applicant’s business to comply with certain Covid 19 governmental requirements or guidance.

Other SBA loan forgiveness extended:

• If you get a new Section 7(a) or 504 Microloan before Sept. 20, then your first six months of principal and interest (up to $9,000 a month) will be forgiven.

• If you already have an existing SBA Section 7(a) or 504 Microloan, then you can get up to eight months of forgiveness (three months plus an additional five months if you’re in a hard-hit industry such as food service and accommodation, arts, entertainment and recreation, and education, as well as laundry and personal care services).  Principal and interest payments, up to $9,000 a month.

     o Section 7(a) loan, obtained through an SBA lender, is a loan that can be used for working capital, equipment, inventory and business acquisitions, can borrow up to $5 million at both fixed and variable interest rates as long as you have fewer than 500 employees and less than $7.5 million in average annual receipts.

     o SBA’s 504 Microloan, obtained through an SBA lender, is a loan that can be used to purchase commercial real estate, existing buildings, and equipment, can borrow up to $5 million at a fixed rate, and has similar requirements to a Section 7(a) loan.

We are not under any obligation to update the content on this site, and changes in the law may have occurred since the content was published which may cause it to no longer be accurate. Please use this for informational purposes only. It should not be relied upon as tax or legal advice. Contact our office at (760) 423-0133 or via email info@solowitzyehcpa.com