First off, Happy New Year! I hope you all enjoyed a happy, and most importantly, healthy holiday season.
Secondly, it’s a brand new year… But we’re still facing many of the same problems. Particularly in California. Govern Newsom has extended the current lockdown order “indefinitely.” Which has forced many businesses to shutter or further curtain operations.
Of course, this is bad news for a whole lot of people, business owners and employees alike. And many of the uncertainties that have plagued our world for the past 9 months persist.
Fortunately, the federal government finally pushed through another COVID relief package — dubbed The Consolidated Appropriations Act (CAA) — just prior to the close of 2020. Of course, it’s chock full of programs, earmarks, and loads of funding ($900 billion worth).
There’s a lot to digest. But in an attempt to cut to the chase, here’s a brief overview of CAA’s key points…
$600 “Stimulus” Checks for Qualified Individuals (Plus an Additional $600 Per Child for Families With Minor Dependents)
$600 direct stimulus checks will go to all adults with an adjusting annual gross income of less than $75,000, while $1,200 will go to couples who earn less than $150,000 annually. Additionally, households with dependents will also receive $600 per minor child.
This is probably the most publicized aspect of the aid package, as the President, among others (including both Republicans and Democrats), lobbied for direct stimulus payments of $2,000 per adult.
The effort, however, was ultimately foiled by Senate majority leader Mitch McConnell, when he objected to the increase in the final voting. And, according to Senate procedural rule, apparently, only a single objection was sufficient to nix the upgrade.
Unemployment Benefit Extended
Federal jobless benefits have been extended for another 11 weeks (lasting until March 14th). The maximum weekly amount is capped at $300, however, which is roughly half of the benefit provided in the spring aid package.
Medical Expense Deduction Floor Permanently Set at 7.5% for ALL Taxpayers
The Tax Cuts + Jobs Act of 2017 already tinkered with this provision, but CAA permanently sets the medical expense deduction at 7.5% of your adjusted gross income (AGI). This means you can deduct cumulative medical expenses that exceed 7.5% of your AGI.
Charitable Donation Deductions Extended
Non-itemized deduction for cash domination to qualified charities up $300 ($600 for married couples filing jointly) is extended through 2021.
And the waiver allowing 100% deduction (increased from the prior cap of 60%) on cash donations to qualified charities is also extended through 2021.
Small Business Support
Another $285 billion has been pledged to fund additional Payroll Protection Program (PPP) loans. CAA, however, imposes a stricter slate of rules and regulations…
- Individual loans are capped at $2 million.
- Only companies with 300 or fewer employees are eligible.
- Businesses must have experienced at least a 25% drop in sales from the prior year to qualify.
- Publicly traded companies are indelible.
Restrictions on Evictions + Foreclosures
The moratorium on the eviction of tenants struggling to pay rent due to the pandemic has been extended until January 31st. And a similar ban on the foreclosure of Federal Housing Administration (FHA) backed loans is in place until February 28th. Another $25 billion in rental assistance has also been authorized.
Support for Education
With the current “distance learning” requirements, many school districts and colleges have been forced to invest in expensive technological tools and infrastructure upgrades to “remotely educate” students. And as a result, the already strapped budgets of many public institutions have been completely decimated.
CAA earmarks $82 billion specifically to support schools. $54 billion is going to K thru 12 schools. And another $23 billion is going to colleges and universities.
Restrictions on “Surprise Medical Bills”
Ambulance rides, emergency room care, and treatment by “out-of-network” doctors can add up to uuuuuuge medical bills. Which are arriving at a time when many folks are more cash strapped than ever. Which further compounds the stress surrounding the illness that landed them under medical care in the first place.
CAA, however, makes it illegal for hospitals to bill patients for emergency services that are out of their control.
The Consolidated Appropriations Act (CAA) documentation runs over 5,600 pages and covers quite a bit of ground. Far too much to preview here. But some other key provisions include…
Public Health Funding — $70 billion for vaccination purchases, vaccination distribution, and test-and-trace programs, along with a host of other public health-related programs
Child Care Support — $10 to help ailing daycare business and help parents with daycare fees
Fund Stamp + Food Support Expansion — $13 billion to support various food and nutrition-related programs
Broadband Infrastructure — $7 billion to extend high-speed internet services to support the enormous uptick in remote workers
PPP Funds Ruled Deductible By Congress
Congress intervened prior to the Christmas break and overruled the IRS’s decision to exclude business expense deductions paid using PPP funds. Now, businesses are free to deduct rent, payroll, and other infrastructure costs typically deducted from gross income paid with forgiven PPP funds.
This is not actually part of the COVID aid package, but it’s never a huge boon to countless small businesses.
Tax Season is Here… Are Your Finances in Order?
Are your finances in order? If not, it’s time to get cracking. And I’m here to help! Let’s chat ASAP.