What can the CAA do for you?

By now you've probably heard or read about the recently passed Consolidated Appropriations Act (CAA), which includes provisions to address the ongoing economic hardships caused by the COVID-19 pandemic.

At over 5,500 pages, the law presents taxpayers and their advisors with much to digest. Whether you're an individual looking for some financial relief or a business owner striving to keep your company operational and competitive, here are just a few of the things the CAA can do for you.

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Provisions for individuals

As of this writing, many people have already received the Economic Impact Payments provided by the CAA. These are $600 for individuals with adjusted gross incomes (AGIs) up to $75,000 and $1,200 for married couples filing jointly with AGIs up to $150,000 (based on 2019 tax returns) — plus $600 per qualifying child. Above these AGIs, the EIPs begin to phase out.

The CAA also makes available an additional $300 per week in unemployment benefits to qualifying individuals, including the self-employed, gig-economy workers and others in nontraditional employment. This provision is effective through March 14, 2021, with the maximum period for state-paid benefits extended to 50 weeks.

Other provisions that may prove useful include a permanent reduction in the medical expense deduction floor to 7.5% of AGI; an extended and expanded charitable contribution tax deduction for nonitemizers through this year; and an extended exclusion for certain employer payments of student loans.

Provisions for employers

For businesses and other employers, arguably the biggest news is the continuation and expansion of the Paycheck Protection Program (PPP). The federal government has allocated new funding for first-time and so-called "second draw" forgivable loans to eligible organizations. There are dedicated set-asides for very small businesses and lending through community-based financial institutions.

In addition, the CAA expands PPP-eligible expenses to now include items such as certain operating expenses, property damage costs, supplier costs and worker protection expenses. The act also clarifies the tax treatment for PPP loans, certain loan forgiveness and other financial assistance under COVID-19 legislation.

Beyond the PPP, the CAA increases the business meals tax deduction to 100% for 2021 and 2022 for food and beverages purchased from restaurants. It also extends the repayment period for deferred payroll taxes.

If you're interested in tax credits, the CAA offers plenty. It extends and expands a retention tax credit for eligible employers that continue to pay employee wages during COVID-19 closures or after experiencing reduced revenue. Plus, the act extends tax credits for paid sick and family leave, as well as the Work Opportunity tax credit, the New Markets tax credit and Empowerment Zone tax incentives.

For more information

It's important to identify all the ways the CAA may affect — and, most important, improve — your tax situation. Please contact us for more information and with any questions or concerns.

Other articles in the January 2021 Edition of Business Matters: