There are myriad ways to describe 2020. One word that I suspect resonates for everyone is pivot. With all of the new and changing legislation last year, the CCM Tax Team analyzed and strategized and reanalyzed and restrategized on behalf of clients more times than I can count. And we suspect with the most recent election results in Georgia, we’ll continue to pivot throughout 2021. But for now, let’s start with what we know.

On December 27, 2020, President Trump signed the Consolidated Appropriations Act of 2021 into law, which includes more than $900 billion allocated to pandemic-related relief. Highlights of the bill include the following:

Additional Direct-to-Taxpayer Rebates

Additional stimulus payments of up to $600 per eligible family member, including taxpayer, spouse, and qualifying children, will be distributed in the same manner as the earlier payments under the CARES Act ($1,200 for taxpayer/spouse and $500 for qualifying child). These additional payments will be calculated based on reported income on 2019 tax returns and will be phased out as income exceeds $75,000 for single filers or $150,000 for joint filers. If you qualify, the status of your payments can be tracked by visiting the IRS website at https://www.irs.gov/coronavirus/economic-impact-payments. The stimulus payment information will be reported and reconciled with the filing of 2020 income tax returns where you can claim additional credit if your income in 2020 is lower than the income used by the IRS to calculate the advance payments.

Paycheck Protection Program (PPP) Loan Updates

The bill includes additional funding for PPP loans to include access to a second round of loans for businesses hit most hard by the pandemic based on loss in revenue. The bill also overrides an IRS interpretation by confirming that the forgiveness of PPP loans will not result in taxable income or the loss of business deductions.

Above-the-Line Charitable Contribution Deduction Extended

The CARES Act allowed for an above the-line-deduction (i.e. available for those who do not itemize deductions) for cash charitable contributions of up to $300 for single or married taxpayers for tax year 2020. The new bill extends this provision to tax year 2021 and increases it to a maximum of $600 for married taxpayers for 2021.

Above-the-line Charitable Contribution Deduction Extended

The following provisions have been included in the Act and are of interest to a great number of our clients:

• The AGI (Adjusted Gross Income) threshold for determining deductible medical expenses is permanently reduced to 7.5% of AGI from 10%.
• Business-related meal expenses are 100% deductible for tax years 2021 and 2022, rather than 50%.
• Federally assisted unemployment benefits are extended for an additional 11 weeks.
• Employer reimbursements of student loan payments of up to $5,250 annually are excluded from an employee’s income through the end of 2025 under an employer’s qualified educational assistance program.

CARES Act Relief Provisions NOT Extended

Notably, the Act did not extend certain relief provisions under
the CARES Act to tax year 2021 including:

• Waiving Required Minimum Distributions (RMDs) from retirement accounts, which were waived for tax year 2020.
• Coronavirus Related Distributions with favorable tax and penalty attributes, which were allowed for tax year 2020.
• Tax filing and payment dates, which were delayed for returns or payments due in 2020.

As 2021 continues to take shape, we’ll keep you informed of relevant changes in tax laws and work proactively alongside CCM advisors to deploy tax strategies that support your goals.

If you ever have any questions about your tax situation, we encourage you to connect with your CCM advisor.

Key 2021 Tax Figures

From tax rates to HSA contribution limits and estate tax exclusions, many important tax-related figures have been updated. See a table of some of the most commonly referenced data here: carlsoncap.com/2021-tax.