Skip to Content

End of Year Stimulus Package
December 2020

Dec 30, 2020 | Business Owners | Cash Flow | Families | Featured

The latest Coronavirus recovery measures were signed into law on December 27th, as part of the behemoth, 5,593-page Consolidated Appropriations Act of 2021. The package extends aid to millions of struggling households through stimulus checks, enhanced federal unemployment benefits, and money for small businesses, schools and childcare, as well as for vaccine distribution. This support comes at an important juncture for many of those hit hardest economically by the pandemic.

Here is an overview of what we believe is likely to be most relevant to Pathway clients:

Stimulus checks:

You will receive a stimulus payment of $600 per taxpayer, plus $600 per qualifying child, if your 2019 income is below the threshold of $75,000 for single filers, $112,500 head of household filers, and $150,000 for joint filers. Above those thresholds, your payments will be decreased by $50 for every $1,000 of earnings. For example:

Jonathan is single with no qualifying children and has an adjusted gross income (AGI) of $80,000.
• As a single taxpayer his base payment would be $600.
• Because his AGI is $5,000 above the threshold his payment would decrease by $250 ($50×5).
• His stimulus payment will be $350.

If your 2019 income was too high, but your 2020 income is below the thresholds, you will receive the stimulus as a tax credit when you file 2020 taxes. These payments are scheduled to begin the last week of December for direct deposits and January 15th for paper checks.

Charitable Deductions:

A few provisions relate to charitable actions:

For taxpayers who take the standard deduction, charitable donations to a 501(c)(3) charity can still be deducted from income, up to $300 in 2020, and $300 single/$600 joint in 2021.

• You can use cash charitable contributions direct to charities (not donor advised funds or 509(a)(3)supporting charities) to offset 100% of your Adjusted Gross Income in 2020 and 2021.

Education-related changes:

• Employers can now help employees pay for previously incurred student debt as part of their education benefits – a planning opportunity for small business owners.

• The FAFSA will be simplified by 2023, with fewer questions and a name change from “Expected Family Contribution” to “Student Aid Index.”

• While the above-the-line deduction for qualified tuition & related expenses has been eliminated starting in 2021, income limits for the American Opportunity Tax Credit/Lifetime Learning Credit have been increased.

Business Provisions:

• A new round of Payroll Protection Program (PPP) funding is included. Small businesses who had a decrease in revenue of 25% in any quarter in 2020 can qualify for a second PPP loan.

• The new bill clarified that the expenses paid with PPP loans are tax deductible.

• The Employee Retention Tax Credit (ERTC) is greatly expanded and now available for businesses who also received a PPP, with the caveat that the expenses used for claiming the ERTC cannot have been covered by a forgivable PPP loan. Businesses are eligible if their year-over-year gross receipts decreased by 20% or more.

• Business meals are deductible at 100% in 2021 (up for 50%) – likely in a move to support a hard-hit sector.

Medical Provisions:

• Deductibility of medical expenses made permanent for expenses above 7.5% of AGI for all itemizing taxpayers.

• Unspent flexible spending account dollars may be rolled over into 2021 and 2022 at the discretion of the employer.

Please reach out to us if you have any questions or would like to discuss your specific situation.

IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Pathway Financial Advisors, LLC-“Pathway”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Pathway. Please remember that if you are a Pathway client, it remains your responsibility to advise Pathway, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Pathway is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Pathway’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Pathway does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Pathway’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.