On December 21, 2020, the U.S. Congress passed the next round of COVID-19 stimulus. The final legislation is known as the Consolidated Appropriations Act (“the Act”). This legislation included multiple new provisions and addressed provisions created during the CARES Act that were set to expire at the end of the year.
Business Meals 100% Deductible for 2021 & 2022
The Act included a temporary allowance to allow business meals to be fully deductible for the years 2021 and 2022 if they are provided by a restaurant. Before the Act was passed, taxpayers were able to deduct 50% of client-related business meals. The provision for the deduction is not retrospective for the 2020 tax year.
Expired/Expiring Tax Provisions Renewed
The legislation included extensions on provisions that were established under the CARES Act that either expired or were set to expire on December 31, 2020. The provisions are:
- Taxpayers who take the standard deduction can take a charitable deduction up to $300 for single filers or $600 for joint filers is extended through the 2021 tax year.
- The limitation on qualifying disaster relief charitable contributions is suspended through 2021.
- The extension of various energy-related tax credits.
- Treatment of mortgage insurance premiums as qualified residence interest is extended to December 31, 2021.
- Credit for health insurance costs of eligible individuals is extended to January 1, 2022.
- The ability to accelerate depreciation for business property on Indian reservations is extended to December 31, 2021.
- The refundable payroll tax credit for paid sick and family leave is extended to March 31, 2021.
Other Provisions to the Consolidated Appropriations Act
The legislation included additional provisions to help offset the effects of the pandemic on individuals and businesses. These other provisions include:
- Direct payment of $600 to individuals who are making less than $75,000 and $1,200 to couples who are making less than $150,000. There is an additional $600 that can be received for each dependent child under the age of 17.
- Those on unemployment will receive an additional $300 for all workers receiving unemployment benefits through March 14, 2021.
- Depreciation of certain residential rental property over a 30-year period for those that elected real property trade or business under section 163(j).
- Lowers the minimum low-income housing tax credit to 4%.
- Temporary special rules will allow taxpayers with unused health and dependent flexible spending accounts to roll from 2020 to 2021 and from 2021 to 2022.
- The legislation establishes rental assistance for states and local governments. The funds can be used for payment of rent, rent arrears, utilities, and energy costs as well as those costs in arrears.
With the extension of certain provisions and the inclusion of additional provisions, there are opportunities for taxpayers to take advantage of to help better their financial positions as well as reduce tax liabilities. While this legislation has passed through Congress, President Trump has not signed the bill into law yet, which means the provisions and information detailed above could change. Please reach out to your Calvetti Ferguson tax professional to discuss your personal situation.