Stimulus 12/27/2020 - Individuals
Below is a summary of significant provisions of the Consolidated Appropriations Act, 2021 (the Act) that was signed into law on December 27, 2020. The items summarized below are the provisions of the Act we believe are most relevant for our clients.
Stimulus Checks
Additional stimulus checks of $600 per taxpayer ($1,200 for married taxpayers filing jointly) and $600 per qualifying child under age 17. The amounts above are reduced by 5% of the taxpayers adjusted gross income above $150,000 for married taxpayers filing jointly, $112,500 for a head of household, and $75,000 for other taxpayers.
Continuation of Federal Unemployment Benefits
The Act provides for an additional $300 per week in unemployment benefits starting December 26, 2020 and ending March 14, 2021.
Extension of Repayment Period for Employee Deferred Payroll Taxes
In August 2020, the President issued a memorandum allowing employers to defer withholding the employee’s share of Social Security taxes between September 1, 2020 and December 31, 2020, and required employers to increase withholding and pay the deferred amounts between January 1, 2021 and April 30, 2021. The Act extends the repayment period through December 31, 2021.
$250 Educator Expense Deduction
The Act requires the IRS to issue guidance providing that personal protective equipment, disinfectant, and other supplies used for the prevention of the spread of COVID-19 are eligible expenses for purposes of the $250 educator expense deduction.
Charitable Deductions
In 2021, taxpayers who don’t itemize can still get credit for charitable contributions of $300 for single filers and $600 for married filers in addition to the standard deduction.
For taxpayers that do itemize deductions, the deductible contribution limit in 2021 is 100% of adjusted gross income, same as in 2020. Usually, deductible charitable contributions are capped at 60% of adjusted gross income.
7.5% Medical Expense Deduction
For those that itemize deductions, medical expenses are only deductible in the amount they exceed 7.5% of adjusted gross income. That amount was set to increase to 10% after 2020. The Act keeps this amount at 7.5% permanently.
Stimulus Checks
Additional stimulus checks of $600 per taxpayer ($1,200 for married taxpayers filing jointly) and $600 per qualifying child under age 17. The amounts above are reduced by 5% of the taxpayers adjusted gross income above $150,000 for married taxpayers filing jointly, $112,500 for a head of household, and $75,000 for other taxpayers.
Continuation of Federal Unemployment Benefits
The Act provides for an additional $300 per week in unemployment benefits starting December 26, 2020 and ending March 14, 2021.
Extension of Repayment Period for Employee Deferred Payroll Taxes
In August 2020, the President issued a memorandum allowing employers to defer withholding the employee’s share of Social Security taxes between September 1, 2020 and December 31, 2020, and required employers to increase withholding and pay the deferred amounts between January 1, 2021 and April 30, 2021. The Act extends the repayment period through December 31, 2021.
$250 Educator Expense Deduction
The Act requires the IRS to issue guidance providing that personal protective equipment, disinfectant, and other supplies used for the prevention of the spread of COVID-19 are eligible expenses for purposes of the $250 educator expense deduction.
Charitable Deductions
In 2021, taxpayers who don’t itemize can still get credit for charitable contributions of $300 for single filers and $600 for married filers in addition to the standard deduction.
For taxpayers that do itemize deductions, the deductible contribution limit in 2021 is 100% of adjusted gross income, same as in 2020. Usually, deductible charitable contributions are capped at 60% of adjusted gross income.
7.5% Medical Expense Deduction
For those that itemize deductions, medical expenses are only deductible in the amount they exceed 7.5% of adjusted gross income. That amount was set to increase to 10% after 2020. The Act keeps this amount at 7.5% permanently.
