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Highlights of the Second Covid-19 Relief Bill

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After months of proposals, negotiations, disagreements, and ultimately inaction, Congress overwhelmingly approved a $900 billion COVID-19 relief package for individuals and businesses. The relief package, which passed the Senate by a vote of 92-6 and passed the House by a vote of 359-53, includes a variety of measures aimed at helping American families and businesses avoid financial ruin. Many of the provisions will sound familiar, as they are extensions of programs introduced under the first relief package, The CARES Act.

The bill is over 5,500 pages long, so we’ll highlight the most crucial 5 points below.

  1. Additional 2020 Recovery Rebates for Individuals and Amendments to Earlier Recovery Rebates (commonly called stimulus checks). The provision provides a refundable tax credit in the amount of $600 per eligible family member. The credit is $600 per taxpayer ($1,200 for married filing jointly), in addition to $600 per qualifying child. The credit phases out starting at $75,000 of modified adjusted gross income ($112,500 for heads of household and $150,000 for married filing jointly) at a rate of $5 per $100 of additional income.

Taxpayers receiving an advance payment that exceeds the amount of their eligible credit will not be required to repay any amount of the payment. On the other hand, if the amount of the credit determined on the taxpayer’s 2020 tax return exceeds the amount of the advance payment, taxpayers will receive the difference.

In general, taxpayers without an eligible social security number are not eligible for the payment. However, married taxpayers filing jointly where one spouse has a social security number (SSN) and one spouse does not are eligible for a payment of $600, in addition to $600 per child with an SSN. The provision aligns the eligibility criteria for the new round of Economic Impact Payments and the credit for the Economic Impact Payments provided by The CARES Act.

Advance payments are generally not subject to administrative offset for past due federal or state debts. In addition, the payments are protected from bank garnishment or levy by private creditors or debt collectors.

Treasury Secretary Mnuchin has indicated that payments will be going out as early as before year-end, with the majority expected to be delivered by January 15.

  1. Extension of unemployment insurance. The wide-ranging unemployment benefits initially provided under The CARES Act have largely been extended. Additional unemployment assistance provides 11 weeks of $300 per week emergency unemployment benefits on top of state-paid programs. Lawmakers also added protection for individuals who received pandemic-related unemployment benefit overpayments through no fault of their own and are now unable to repay the funds.
  2. Extension of the Paycheck Protection Program. Lawmakers created a second loan from the Paycheck Protection Program (PPP), called a “PPP Second Draw” loan for smaller and harder-hit businesses, with a maximum loan amount of $2 million. In order to receive a PPP Second Draw loan, eligible entities must: employ not more than 300 employees, have used or will use the full amount of their first PPP; and must demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter (although applicable timelines for businesses that were not in operation in Q1, Q2, and Q3, and Q4 of 2019 are provided). Applications submitted on or after January 1, 2021 are eligible to utilize the gross receipts from the fourth quarter of 2020.

Tax Treatment of PPP Loans. The provision provides that gross income does not include any amount that would otherwise arise from the forgiveness of a PPP loan. This provision also overrides current law, which prevents the deduction of expenses paid with tax-exempt income by allowing businesses to deduct business expenses paid with the proceeds of a PPP loan that is forgiven.

Loan Forgiveness. Borrowers of a PPP Second Draw loan are eligible for loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the covered period. The 60/40 cost allocation between payroll and non-payroll costs in order to receive full forgiveness will continue to apply.

  1. Deducting Charitable Contributions by Non-Itemizers. This provision allows taxpayers who do not itemize to claim up to $300 in the form of a deduction for charitable contributions. The second relief bill extends this benefit through tax year 2021 and allows those to file married-filing-jointly returns to claim $600 in 2021.
  1. Special Disaster Related Rules for Use of Retirement Funds. This provision provides an exception to the 10% early retirement plan withdrawal penalty for qualified disaster relief distributions (not to exceed $100,000 in qualified disaster distributions cumulatively). Amounts withdrawn are included in income spread over 3 years or may be recontributed to a retirement plan to avoid taxable income and restore savings.

A few items of note that were included in the “tax extenders” portion of the bill:

  • Lifetime Learning Credit – An increase in the income limitations for claiming the lifetime learning credit to $80,000 for single filers and $160,000 for those filing as married filing joint.
  • Medical Expenses Limitation Lowered – The previous floor requiring medical expenses to be itemized of 10% of AGI has been lowered to 7.5%.
  • Temporary Allowance for Full Deduction of Business Meals – The previous limitation for a 50% deduction of business meals has been lifted through 2022.
  • Additional time to spend money from Flex Spending Accounts

If we can help you understand any provisions of the bill or answer any questions you may have, we would love to speak with you.

Links to Legislative Text

The relief package’s tax provisions and the PPP extension appear in three separate bills that were part of the 5,593-page Consolidated Appropriations Act, 2021 as follows:

(1) the Covid-Related Tax Relief Act of 2020, which extends and modifies earlier Covid relief provisions from the Families First Coronavirus Response Act (Families First Act) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act);

(2) the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which extends and modifies the Paycheck Protection Program.

(3) the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which extends numerous expiring tax breaks and adds several new ones.



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Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.


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