The Consolidated Appropriations Act, 2021 (the Act) was signed into law by President Trump on December 27, 2020. The Act includes many favorable provisions, including several tax changes that have been modified from earlier legislation and many that have been extended.
New Tax Provisions
- The Act allows PPP borrowers to fully deduct their covered expenses. (Learn about more of the PPP changes in addition to this tax provision here.)
- Business meals are fully deductible for two years, between December 31, 2020 and January 1, 2023. This only applies to food and beverages provided by a restaurant.
- Additional $600 stimulus payments will be provided to eligible individuals. Eligibility is the same as the original stimulus payments earlier in 2020.
- The Employee Retention Credit was greatly modified and has increased applicability to more businesses, including businesses that received PPP loans. Among other changes, the Act creates an increased credit from 50% to 70% of qualified wages. (Learn more about the ERTC changes in the Act here.)
- The payroll tax credits available under the Families First Coronavirus Response Act (FFCRA) are extended through March 31, 2021. The employee leave that was mandatory is no longer required in 2021, but an employer can voluntarily provide the family care leave and still be eligible for the credits through March 31, 2021.
Various Tax Extenders:
- The CARES Act increased the charitable deduction limits for 2020. The new Act extends these increased limits to 2021 as well. You can see more information about the CARES Act charitable contributions changes here.
- The CARES Act allowed a $300 “above the line” deduction for charitable contributions, regardless of whether you itemize your deductions or not. This provision has been extended through 2021.
- The Act extends many energy tax credits that were set to expire.
- New Markets Tax Credit and the Work Opportunity Tax Credit have been extended to
December 31, 2025.
Connect with a Tax Advisor
If you have questions about how these provisions impact your business, please reach out to your Warren Averett advisor, or have a member of our team reach out to you
This article was originally published on December 22, 2020 and was most recently updated on December 28, 2020.