Last Minute Tax Changes

On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 (CCA2021) into law. With it comes some changes to the tax code.

First, as I previously wrote about, expenses related to PPP Loan Forgiveness are now Deductible and a second round of funding was authorized.

Second, the Employee Retention Tax Credit was changed to allow a 70% credit of certain qualified wages up to $28,000 per year and was extended to July 1, 2021 and those who received PPP loan funds are now eligible if they meet certain criteria.

Third, Recovery Rebates (read advance tax credits) of additional $600 per individual (taxpayers and dependents under 17) for those with incomes less than $75,000 for individuals and $150,000 for married filing joint with no qualifying children.

Paid Sick Leave and Family Leave Tax Credits were extended through the first quarter of 2021. While previously required for certain sized employers in 2020, participation is voluntary in 2021 but the credit is available to those who do.

Fifth, business meal deductions are temporarily increased from 50% deductible to 100% deductible for 2021 and 2022 for business meals provided at a restaurant. A business meal must have a client or employee present and business must be discussed just prior, during or just after the meal. Meals while traveling for business are also considered business meals.

Sixth, a correction for residential rental property. Under the prior law (TCJA), a real property trade or business could elect out of the limitation on the deductibility of business interest if it elected to depreciate residential property over 30 years. The law previously required a 40 year life.

Seventh, the above the line charitable deduction for those who do not itemize was increased to $300 for individuals and $600 for married filing joint. Those who overstate the deduction will be subject to 50% penalties.
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There were also a couple of changes that apply to related controlled foreign corporations and the deferral of the employee side payroll taxes which do not apply to most taxpayers.