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COVID-19 Relief Law Boosts Temporary Tax Deductions and Credits

2/15/2021

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Embedded in the COVID-19 relief law is $900 billion for financial assistance.


As you would expect in these unusual times, some of the relief is in the form of direct government financial assistance and some is from tax benefits that can impact both tax year 2020 and tax year 2021.


Most of the provisions create extra deductions or credits where Uncle Sam puts cash directly into your wallet. Here are four:


1. Recovery Rebate Payments and Credits


Remember those $1,200 checks many people got earlier in the year? Well, there’s another round of $600 payments coming, with rules very similar to the first round.


2. Paid Sick and Family Leave Credits


As you may remember from the March 2020 law, Congress provided two ways to give workers paid sick and family leave:


  1. Employers received refundable payroll tax credits to fully offset the cost of the government mandate that employers provide paid sick and family leave to their employees.
  2. Self-employed persons also qualify for paid sick and family leave. They claim a refundable tax credit against their 2020 self-employment tax.


The tax credits require that the self-employed person or the employee was unable to work due to a qualifying situation between April 1, 2020, and December 31, 2020. The maximum non-working days eligible for the tax credits are


  • 10 days for paid sick leave, and
  • 50 days for paid family leave.


Under the new law, you now can claim these tax credits for qualifying days through March 31, 2021. But the new law did not increase the maximum creditable days.


3. 100 Percent Business Meal Deduction


The new December 27, 2020, law allows you to deduct 100 percent of your business-related expenses for food and beverages provided by a restaurant for amounts paid or incurred after December 31, 2020, and before January 1, 2023.


4. Charitable Contributions


The CARES Act made three major changes to charitable contribution deductions for tax year 2020:


  1. For individuals, there is no adjusted gross income (AGI) limit for contributions normally subject to the 50 percent and 60 percent limitations. The 2020 no-limit rule does not apply to donor-advised funds.
  2. For corporations, the 10 percent limitation goes up to 25 percent of taxable income.
  3. If you are a non-itemizer, you may now deduct above-the-line cash charitable contributions up to $300 for tax year 2020 only.


The new law enacted on December 27, 2020, extends the increased charitable contribution deduction limits for individuals and corporations to tax year 2021. In addition, in tax year 2021, non-itemizers can deduct below-the-line cash charitable contributions up to $600 on a married-filing-joint return ($300 for singles).
If you would like to discuss any of the changes described above, please contact us! 
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    Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

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    To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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    These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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    Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion.  Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

    Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

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