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2021

Pandemic Relief

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Pandemic Relief Tax Provisions Extended

A number of provisions that were set to expire at the end of
The following is a brief summary of key tax provisions in-
2020 were extended. These provisions include:
cluded in the Consolidated Appropriations Act, 2021,
• Mortgage insurance premium deduction (2021).
signed into law on December 27, 2020.
• Nonbusiness Energy Property Credit (2021).
• Residential Energy Efficient Credit (2023).
Charitable Contributions
• Exclusion from gross income of cancellation of qualified
• The CARES Act permits taxpayers who claim the standard
principal residence indebtedness (2025).
deduction a deduction of up to $300 for qualified charita-
• Educational assistance program to include certain
ble contributions made during 2020. The new law extend-
employer payments of employee student loans (2025).
ed this provision for 2021 with a maximum deduction of
$300 ($600 for Married Filing Jointly).
Earned Income
• The increased charitable contribution deduction limit of
For purposes of determining earned income for the 2020
100% (from 60%) is extended through 2021.
Earned Income Credit and Additional Child Tax Credit, you
may elect to use your 2019 earned income if 2020 earned in-
Tax Provisions Made Permanent
come is less than 2019.
• The threshold for deducting medical expenses as an
itemized deduction is 7.5% of AGI.
Business Meal Expense Deduction
• The tuition and fees deduction is no longer available for
Generally, the deduction for business meals is limited to
expenses paid after December 31, 2020.
50% of the cost of the meal. For the period January 1, 2021
• The Lifetime Learning Credit phaseout range is equal to
through December 31, 2022, the limitation is increased
the American Opportunity Credit effective for tax years
to 100% of the cost of food or beverages provided by a
beginning after December 31, 2020. The modified AGI
restaurant.
limitation for both credits is $80,000 – $90,000 ($160,000 –
$180,000 MFJ). Paycheck Protection Program (PPP)
• The deduction for energy efficient commercial building The new law extends the PPP to March 31, 2021 with addi-
property. tional funding and makes several modifications to the PPP
• The gross income exclusion for certain benefits provided provisions.
to volunteer firefighters and emergency medical • The list of expenses that are allowable uses of PPP funds
responders. for loan forgiveness was expanded. Expenses added to
the 40% category for non-payroll costs include covered
operations expenditures, covered property damage costs,
covered supplier costs, and covered worker protection
expenditures. continued
 Emergency Financial Aid Grants
Qualified emergency financial aid grants made after March
Pandemic Relief 26, 2020 to college and university students are not includ-
ed in the gross income of a student receiving the grant. The
grant also does not reduce the amount of qualified tuition
• Allowable payroll costs include group life, disability, and related expenses for purposes of the education credits.
vision, and dental insurance benefits.
• A “PPP second draw” loan was created for smaller,
Tax Treatment of Loan Forgiveness
The new law clarifies that gross income does not include
harder-hit businesses, with a maximum loan amount of $2
forgiveness of certain loans, emergency EIDL grants, and
million. Eligible entities must not have more than 300 em-
certain loan repayment assistance, as provided by the
ployees, have used or will use the full amount of the first
CARES Act. Deductions are allowed for otherwise deduct-
PPP loan, and demonstrate at least a 25% reduction in gross
ible expenses paid with the amount not included in income,
receipts in the 1st, 2nd or 3rd quarter of 2020 relative to the
and that tax basis and other attributes will not be reduced
same quarter in 2019.
as a result of the exclusion from income. This provision is
PPP—Tax Treatment of Expenses effective for tax years ending after March 27, 2020. A similar
PPP loans that are forgiven are excluded from taxable in- treatment applies for Targeted EIDL advances and Grants
come. Expenses that are otherwise tax deductible and paid for Shuttered Venue Operators, effective for tax years end-
for with PPP loan proceeds are allowed as a deduction on ing after December 27, 2020.
your tax return.
The new law clarifies that gross income does not include
any amount that would otherwise arise from the forgive-
ness of a PPP loan. The new law also clarifies that no deduc-
tion shall be denied, no tax attribute reduced, and no basis
increase shall be denied by reason of the exclusion of gross
income under the PPP loan program.

Payroll Tax Credits

• The Paid Sick and Family Leave Credit was extended for
wages paid through March 31, 2021.
• The Employee Retention Credit was extended for wages
paid through June 30, 2021. Changes to the Employee Re-
tention Credit, effective for calendar quarters beginning
after December 31, 2020, include the following.
– The credit limit was increased from 50% to 70%.
– The $10,000 limit applies on a per calendar quarter
per employee basis, rather than a limit for all calendar
quarters.
– A significant decline in gross receipts means less than
80% of gross receipts for the same calendar quarter in
2019. Contact Us
– You may elect to use the immediately preceding cal- There are many events that occur during the year that can affect
endar quarter instead of the corresponding calendar your tax situation. Preparation of your tax return involves sum-
marizing transactions and events that occurred during the prior
quarter in calendar year 2019 for purposes of deter- year. In most situations, treatment is firmly established at the
mining a significant decline in gross receipts. time the transaction occurs. However, negative tax effects can
– The 100 employee threshold is increased to 500 be avoided by proper planning. Please contact us in advance
if you have questions about the tax effects of a transaction or
employees. event, including the following:
• Pension or IRA distributions. • Retirement.
• Significant change in income or • Notice from IRS or other
deductions. revenue department.
• Job change. • Divorce or separation.
This brochure contains general information for taxpayers and • Marriage. • Self-employment.
should not be relied upon as the only source of authority. • Attainment of age 59½ or 72. • Charitable contributions
Taxpayers should seek professional tax advice for more information. • Sale or purchase of a business. of property in excess of
• Sale or purchase of a residence $5,000.
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