The Act includes several tax provisions that aim to provide relief to individuals and businesses impacted by the COVID-19 pandemic. Here are a few:
- Paycheck Protection Program (“PPP”): Forgiven PPP loans are not taxable income and have no effect on business basis for tax purposes. Deductions are allowed for otherwise deductible expenses that are paid with funds from a forgiven PPP loan, overturning the IRS’s previous guidance.
- Increased limits for corporations and charitable deductions.
- Extends refundable payroll tax credits for paid sick and family leave due to COVID.
- Extends and expands the Employee Retention Tax Credit.
- Extends deferral of payroll taxes: repayment period for employers through December 31, 2021, and penalties and interest on deferred unpaid tax liability will begin to accrue on January 1, 2022.
- Several key provisions promoting and expanding Flexible Spending Accounts, including extended grace periods, carry-overs from 2021 to 2022, mid-year modifications, and reimbursement opportunities.
- Stimulus Payments: refundable tax credit of $600 per eligible taxpayer ($1,200 for married filing joint taxpayers and $600 per qualifying child). Phase out beginning with gross incomes over $75,000.
- Ability to deduct charitable contributions of $300 per individual or $600 for married couples even if the taxpayer does not itemize deductions.
- Ability to use 2019 earned income to calculate the EIC as well as the additional Child Tax Credit for 2020.
- Reduced floor from itemized medical expenses on Schedule A; to 7.5% of adjusted gross income, down from 10%
There are several other changes and extensions of benefits from 2020, but above are some of the key provisions.