2021 Tax Law Changes

Consolidated Appropriations Act of 2021

You can view the Act in its entirety by clicking here.

 
Business owners should especially note the following:
  • Meal expenses are now 100% deductible by businesses if paid or incurred after December 31, 2020 but before January 1, 2023.
  • Business owners have until May 1, 2021 to repay any payroll tax deferred under the President’s Executive order in the 4th quarter of 2020.
  • EIDL Grants are non-taxable and the amounts used for qualifying expenses are deductible. The grants are extended until 2021.
  • SBA loan repayments made on behalf of the borrower are not treated as income.
  • Deductions for costs relating to energy efficient commercial buildings is now permanent.
  • Employee Retention credit is extended through July 2, 2021.
  • Self-employed individuals can use their 2019 net income for determining their credit for sick or family leave under the FFCRA.

 

American Rescue Plan Act of 2021

You can view the Act in its entirety by clicking here.

 
Business owners should especially note the following:
  • $7.25 billion in Paycheck Protection Program (PPP) funding has been added. Eligible nonprofits now include those employing 500 or fewer per physical location (300 or fewer per physical location for second PPP loans).
  • $15 billion in Economic Injury Disaster Loan (EIDL) funding has been added. One third of this amount is designated businesses that suffered a revenue loss of greater than 50 percent, are located in low income census tract areas, and employ 10 or fewer people.
  • $25 billion Restaurant Revitalization Fund for 2021 to be administered by the Small Business Administration (SBA). $5 billion of this will be allocated to restaurants whose gross receipts in 2019 were less than $500,000. The first 21 days of the program prioritize small businesses owned by women, veterans, or socially and economically disadvantaged individuals

 

 
Individuals should especially note the following:

Premium Tax Credit

Taxpayers who received too much in advance premium tax credits in 2020 will not have to repay the excess amounts. 

Stimulus Checks

The new stimulus which is rolling out now begins phasing out at $75,000 ($150,000 for MFJ) and is completely phased out by $80,000 ($160,000 MFJ).  The IRS will use 2019 figures if 2020 is not filed yet.

Child Tax Credit

These changes are involving an advance of a 2021 credit that will be provided monthly July-December.  Individuals who will make too much in 2021 may need to opt out.

Additional 2021 Changes:

  • Earned income credit qualification changes for taxpayers with no children
  • Child & Dependent Care becomes a refundable credit & changes to thresholds
  • Employee retention credit expanded to 2021
  • Forgiveness of student loan debt will not be taxable for 2021-2025

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