January 4, 2021

Consolidated Appropriations Act

Top 10 Takeaways
Consolidated Appropriations Act of 2021

1. Additional Direct Payments to Households –  The Department of Treasury will send a $600 stimulus check for each eligible adult and qualifying children in a household based on adjusted gross income up to $75,000 (single return) or $150,000 (joint return).  The amount of the stimulus check is reduced by 5% per $1,000 over $75,000 for single filers and reduced by 5% per $1,000 over $150,000 for joint filers.  If adjusted gross income reaches $87,000 for a single filer or $174,000 for joint filers, household eligibility is reduced to $0.

2. Clarification on Income and Tax Year to receive payments – As written, those who WOULD have been eligible for stimulus based on 2020 income, but did not receive it because of a higher 2019 income, will be eligible for a tax credit for that amount when they file 2020 taxes.  On the other hand, those who had 2019 income that was low enough to qualify for the stimulus, but 2020 income was higher than the threshold, will not have to pay back any stimulus paid out.

3. Extension of Unemployment Benefits – Federal subsidies on unemployment benefits will be extended to the middle of March, 2021.  Additionally, unemployment will be increased by $300 per week for this period of time.

4. FSA eligible for rollover – Flexible Savings Accounts for both medical and dependent care are “use it or lose it” – meaning, if the funds are not used by the end of a given year, those funds are gone.  This bill changes the rule so that funds from 2020 can be rolled to 2021, and 2021 funds can be rolled into 2022.

5. Deductibility of Medical Expenses – Typically, medical expenses are deductible from income only if they exceed 10% of AGI (adjusted gross income).  However, this new law reduces the amount to 7.5% for medical expenses to be deductible.  This was already established by the CARES Act for 2020 but has now been extended for 2021.

6. New Round of Paycheck Protection Program – New funds are available for businesses to borrow under this forgivable loan program.  While the eligibility of expenses that qualify for forgiveness has been expanded, rules are more stringent to qualify for the loan; most notably, a business must show at least a 25% drop in revenue for one quarter in 2020 from the corresponding quarter in 2019.

7. Further Clarity on Tax Deduction of PPP loan expenses – Previously, the IRS had indicated that it would not allow expenses to be deducted for which PPP money had been used (i.e. payroll, rent, etc.), which would have effectively made PPP funds taxable.  However, the new law clarifies that these expenses will still be tax-deductible.

8. Business Meal Deduction – The 2018 Tax Cuts and Jobs Act made it so that only 50% of the cost of  business meals were tax deductible.  The new bill makes it so that 100% of business meal costs are deductible for both 2021 and 2022, in an effort to boost the crippled restaurant industry.

9. Employee Payroll Tax Deferral – Small businesses can defer payroll tax even further, until December 31, 2021

10. Employee Retention Tax Credit – This changes the credit, which was part of the CARES Act, so businesses that use PPP funds can ALSO qualify for this credit, provided they meet other criteria, such as a 20% or greater drop in revenue in 2020.


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