As we enter into a new calendar year, Cassady Schiller wants to make sure that you understand the provisions in Congress’ new stimulus package signed by the President on December 27, 2020 and how they may impact you both personally and within your business. While the below summary represents those provisions that pertain most broadly to our clientele, there may be specific provisions applicable to your situation, which we will be happy to address with you individually.
Additional 2020 Recovery Rebate/Stimulus Checks
Advanced payments of a refundable tax credit have already begun being deposited in taxpayers’ bank accounts. The credit is $600 per taxpayer ($1,200 for MFJ), in addition to $600 per qualifying child. The credit phase-out begins at $75,000 ($150,000 for MFJ) at a rate of $5 per $100 of additional income.
The phase-out of such advanced payments is determined using the taxpayer’s 2019 tax return. If the amount of advance payment received exceeds the amount as determined on the taxpayer’s 2020 tax return, the taxpayer will not be required to repay any amount of the advanced payment. If the amount determined on the taxpayer’s 2020 tax return exceeds the amount of advanced payment received, the taxpayer will receive the difference as a refundable tax credit. Note that the previous determination of eligibility was also based on a taxpayer’s 2019 return, but since those payments were made prior to the filing deadline for 2019 returns, a taxpayer’s 2018 return may have been used to determine eligibility if the 2019 return had not yet been filed.
Charitable Contributions (Non-Itemizers)
A pre-AGI charitable contribution deduction is available to taxpayers claiming a standard deduction on their 2021 tax return. This provision permits MFJ taxpayers to claim a maximum $600 deduction, while non-married and MFS taxpayers will be allowed a $300 deduction. Such contributions must be cash contributions (i.e. cash, check, EFT, payroll deduction, etc.) to a public charitable organization, whereas noncash contributions (e.g. Goodwill donations) and contributions to donor-advised funds, supporting organizations and private foundations, even if made in cash, are specifically disallowed for this pre-AGI deduction.