COVID-19 tax law update

Tax Matters

On December 27, 2020, the Consolidated Appropriation Act of 2021 was signed into law. The Act provides general government funding for fiscal year ending September 30, 2021. It also makes some changes to the tax code and provides various forms of relief meant to address the COVID-19 pandemic.

Some key provisions include:

  • Business expenses paid with PPP loan funds are now deductible for federal income tax purposes, even if the PPP loan has been forgiven. Bills introduced in the New Jersey Senate (S3234) and Assembly (A5149) in December would make the expenses paid with PPP funds deductible for state income taxes as well.
  • $600 dollar direct COVID-19 relief payments to eligible individuals earning up to $75,000 (single), $112,500 (head of household) or $150,000 (married filing jointly). Eligible individuals may also receive $600 per child dependent.
  • Under the Tax Cuts and Jobs Act of 2017, the federal tax deduction for business meals was decreased to 50% of the cost of the meal or expense. The Consolidated Appropriation Act increases the deduction to 100% of the cost for 2021 and 2022.
  • An extension of payroll tax deferral. Employers may choose to delay the withholding and payment of the employee portion of certain payroll taxes for employees making less than $4,000 biweekly pay period. The deferred payments are now due on December 31, 2021.
  • Employers may still take tax credits for providing paid sick or family leave to employees through March 2021. The tax credit is refundable.
  • The refundable employee retention tax credit has been extended to June 2021.
  • Employer payments of up to $5,250 to a qualified educational assistance program will continue to receive nontaxable benefit treatment through 2025.
  • If you have questions about tax planning or exchanges for yourself or your business, Levine, Staller, Sklar, Chan & Brown, P.A. can assist you. We have decades of experience in all aspects of federal and state tax matters. Please call us at 609-348-1300 or contact Arthur M. Brown, Esq.

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