Massive year-end stimulus bill contains numerous tax provisions

| 12/22/2020
Massive year-end stimulus bill contains numerous tax provisions

Nearing midnight on Dec. 21, Congress approved year-end appropriations and stimulus legislation that the president is expected to sign before the new year. The more than 5,500 pages of legislative text include extension and revision of certain COVID-19-related stimulus provisions enacted earlier this year, such as the Paycheck Protection Program (PPP) and enhanced unemployment benefits. The legislation also includes a broad range of tax provisions that are both COVID-19-related and non-COVID-19-related.

Among other things, the tax provisions in the legislation:

  • Clarify that PPP loan forgiveness is excluded from income and that deductible expenses paid with PPP loan proceeds remain deductible even if the loan is forgiven
  • Extend the tax credit for COVID-19-related paid family and sick leave, including certain improvements to the credit
  • Exclude from gross income certain COVID-19-related grants, loans, and subsidies and provide authority for the IRS to forego information reporting on these amounts
  • Allow full deduction for business meals purchased from restaurants for two years
  • Provide a second round of stimulus checks of up to $600 per eligible individual
  • Temporarily extend the ability of individuals claiming the standard deduction to claim a charitable contribution deduction and increase the eligible amount for joint filers from $300 to $600
  • Give individuals until the end of 2021 to repay deferred 2020 payroll taxes
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The legislation also contains relief for expiring provisions by making some permanent (like reducing the craft beverage excise tax and reducing to 7.5% the floor for the medical expense deduction for all taxpayers), extending some through the end of 2025 when most of the individual tax provisions in the Tax Cuts and Jobs Act of 2017 expire (like the new markets, work opportunity, and empowerment zone tax credits, as well as the look-through rule for related controlled foreign corporations), and extending others for one year (like treatment of mortgage interest premiums as qualified residence interest). The extenders include several energy-related provisions, including making permanent the deduction for energy efficient buildings and temporarily extending the carbon capture credit, credits for renewable energy and alternative fuels (including wind and solar), and certain energy credits available to individuals.

Looking forward

Taxpayers should expect additional guidance from the U.S. Department of the Treasury and the IRS once the legislation has been signed. In the meantime, taxpayers should work with their advisers to determine how the new provisions might affect them and whether any planning opportunities exist.

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Rochelle Hodes
Rochelle Hodes
Principal, Washington National Tax