The New Coronavirus Relief Package - Individual Benefits, Stimulus Checks and Small Business Support
As the coronavirus pandemic stretches into 2021, the US government has passed a $900 billion aid package that includes direct payments to individuals as well as protections and payments for business owners. Naturally, the thought of another check from Uncle Sam has everyone wondering when and how much they will receive. Our advisors at EP Wealth Advisors have compiled some thoughts below to equip our clients and those considering working with an advisor at EP Wealth.
Coronavirus Benefits for Individuals
While President Trump and the democrats pushed to increase payments to individuals to $2,000, as-is, only $600 per individual is approved. This package is higher for dependents, up from $500 from the first round of stimulus checks, but decreases the individual's payment, down from $1,200. This is may be subject to change though, as the Biden presidency will come into power shortly and the democrat-controlled house has already approved a $2,000 payment. Just like the first round, stimulus payments will begin to phase out for those with 2019 adjusted gross incomes over $75,000, and $150,000 for those married and filing jointly.
The additional $300 per week in unemployment benefits that were paid out this Summer will resume, but not be paid out retroactively. That additional $300 will also be paid to individuals receiving Employment Compensation via the Pandemic Unemployment Assistance program.
Other Notable Measures:
Charitable Deductions - The legislation has extended the $300 (now $600 for joint return filers) above-the-line deduction for cash donations, regardless of Adjusted Gross Income. Keep in mind, this does not apply when making a donation to a donor advised fund.
Medical Expense Deductions - The medical deduction limit went back to 7.5% of AGI; meaning you can deduct any medical expenses that exceed 7.5% of your Adjusted Gross Income.
Flexible Spending Accounts/Dependent Care Accounts - Employees with balances in their Flexible Spending Account and Dependent Care Spending Account can rollover any unused balance from 2020 to 2021. Employers will need to opt-in so employees should verify with their employers and benefit providers.
How the Stimulus Will Affect Business Owners
Paycheck Protection Program (PPP Loans)
The PPP Loan program is back with another round of loans, this time up to $2,000,000 instead of $10,000,000, subject to some limitations to make sure the money reaches those who need it most. Eligible companies:
- Can have up to 300 employees
- Must have experienced a 25% quarterly drop in revenue compared to the same quarter in 2019
The loan forgiveness process has also been simplified for loans under $150,000 and any expenses paid for with PPP funds are now deductible expenses.
100% Meal Expense Deductibility
For 2021 and 2022, 100% of business-related meals provided by restaurants are tax deductible. While the mechanics of this deduction are still unclear, given social distancing guidelines, “provided by restaurants” is currently being interpreted by many as being both dine-in and carry-out meals.
While this next round of stimulus is likely to change as the Biden presidency begins, it builds on the work done in the Spring and provides a shot of fiscal stimulus into the US economy. It will be exciting to see how markets respond as more details come out over the coming weeks. Interested to learn more about the program and how it might affect you and your financial plan; the advisors at EP Wealth Advisors are available to discuss.
PPP Loan Expenses for Business Owners: A big win for business owners was Congress overriding the IRS’ decision on the deductibility of business expenses paid for by PPP loan proceeds. Any expenses paid for with PPP money can be deducted on the business income tax return.
PPP Loan Forgiveness for Business Owners: There is a simplified process for loan forgiveness for loans under $150,000.
If you have any questions relating to stimulus checks, PPP loans, or other recent updates, please contact your advisor. If you are not yet working with a financial advisor, feel free to reach out using our Contact An Advisor form.
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