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
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.
NOTE: The information provided in this article is intended for clients of Carlson Capital Management. We recommend that individuals consult with a professional adviser familiar with their particular situation for advice concerning specific investment, accounting, tax, and legal matters before taking any action.