Happy New Year! This has been an interesting year with ever-evolving changes that will likely keep us guessing into the future and have made tax planning more challenging.
A few changes that will affect almost everyone:
1. There is a new $300 “above the line” deductuion for cash charitable contributions. Iteminzing deductions is not required, so save your receipts! Everyone can claim this.
2. The Economic Impact Payments (EIP) were an advance against the Recovery Rebate Credit. If you did not receive some or all of your EIP, you will be able to apply for the creidt on your 2020 tax return. Please save the letter you received with your EIP.
3. Unemployment compensation is fully taxable income. If you did not have taxes withheld, this may increase your taxes and/or create a balance due.
4. Most non-SBA grants and COVID assistance is not taxable. Check to be sure!
5. If you took a COVID-related withdrawal from a 401(k) and/or IRA you will have the option to repay it within three years or or pay the tax ratably over a three-year period.
6. Businesses who received an SBA Grant will be subject to tax on it, thouigh SBA Loans are not subject to tax.
7. Businesses who received a PPP loan are now able to deduct expenses paid with the loan regardless of whether or not it is forgiven.
Potential future change to watch for:
1. No later than February 21, 2021 the Secretary of the Treasury will issue guidance as to whether PPE, cleaning, and sanitizing supplies will be allowed as qualified expenses for the $250 educator deduction.
Things are still changing so stay tuned for more updates or give our office a call if you have any questions.
A few changes that will affect almost everyone:
1. There is a new $300 “above the line” deductuion for cash charitable contributions. Iteminzing deductions is not required, so save your receipts! Everyone can claim this.
2. The Economic Impact Payments (EIP) were an advance against the Recovery Rebate Credit. If you did not receive some or all of your EIP, you will be able to apply for the creidt on your 2020 tax return. Please save the letter you received with your EIP.
3. Unemployment compensation is fully taxable income. If you did not have taxes withheld, this may increase your taxes and/or create a balance due.
4. Most non-SBA grants and COVID assistance is not taxable. Check to be sure!
5. If you took a COVID-related withdrawal from a 401(k) and/or IRA you will have the option to repay it within three years or or pay the tax ratably over a three-year period.
6. Businesses who received an SBA Grant will be subject to tax on it, thouigh SBA Loans are not subject to tax.
7. Businesses who received a PPP loan are now able to deduct expenses paid with the loan regardless of whether or not it is forgiven.
Potential future change to watch for:
1. No later than February 21, 2021 the Secretary of the Treasury will issue guidance as to whether PPE, cleaning, and sanitizing supplies will be allowed as qualified expenses for the $250 educator deduction.
Things are still changing so stay tuned for more updates or give our office a call if you have any questions.