Virus Relief Includes Tax Breaks and PPP Expense deduction

The relief bill that passed the House and Senate on Monday, December 21 includes help for small businesses, the jobless, and direct payments to most Americans. It also provides funding for vaccine distribution, food assistance, tax breaks, and money for education and child care.

Here are some highlights of specific provisions:

Help for Businesses

The aid package includes $284 billion for the Paycheck Protection Program that was created in the CARES Act. That program’s loans to firms with fewer than 500 employees can be fully forgiven if companies keep people on their payroll.

The legislation clarifies that business owners can write-off expenses paid for with forgiven PPP loans. The legislation would override an IRS decision that says business can’t claim deductions on costs, such as rent and wages, paid for with tax-free PPP money.

Direct Payments to Individuals

The bill provides $600 in one-time direct payments to individuals and $600 per child. The payments would be phased out for individuals over a certain income threshold. Payments could begin flowing quickly through the Internal Revenue Service.

Unemployment Insurance

Federal unemployment insurance benefits will be extended for 10 weeks through mid-March, with each week supplemented by a $300 payment, similar to the extra $600 supplement that expired at the end of July.

It includes people receiving state unemployment benefits as well as those receiving Pandemic Unemployment Assistance, the pandemic program that provided jobless benefits to those not traditionally eligible like gig workers and the self-employed.

Pandemic Emergency Unemployment Compensation, which provided up to 13 additional weeks of jobless benefits to those who had exhausted their regular state benefits, was extended as well.

Unemployment insurance recipients must pay income taxes on their jobless benefits. Many states don’t automatically withhold taxes when they distribute those payments, so recipients will owe those taxes when they file their tax returns next spring.

Tax Breaks

The legislation extends the Indian wage credit and the Indian depreciation rules for one year through 2021.

An expansion of the business meals deduction is included.

It also includes a renewal of the employee retention tax credit for businesses that keep workers on their payrolls. The break gives companies an additional incentive to keep people employed as many firms still face revenue downturns but have run out of PPP money or never qualified for it.

The package makes changes to the earned income tax credit and the child tax credit to make it available to people who lost wages or jobs during the pandemic, as well as an expanded Low Income Housing Tax Credit to boost construction of housing for low-wage families.

The legislation would make permanent an excise tax break for beer brewers, wine makers and distillers. In addition, other expiring tax credits, including some for mortgage interest premiums and tax credits to help businesses in low-income communities.

The package also extends tax credits for renewable energy projects, including wind and solar production.

Housing, Education, and Other Provisions

The measure contains emergency rental assistance, and it extends the CARES Act’s eviction moratorium until Jan. 31. Other key funding provisions include funds for virus testing, tracing and vaccine development and distribution, education funding, broadband, childcare providers support, funds for the U.S. Postal Service, and nutrition assistance.