Stimulus Payments
In April 2020 the initial round of relief efforts were implemented. Probably the most notable item was the payment of recovery relief credits to many Americans. These "stimulus" payments are technically advance credits on 2020 income taxes and were based primarily on 2019 tax return filings. If it turns out in 2020 that you were paid too much, no need to worry as you don't have to repay the excess amount. For some people who did not receive payments or received less than the maximum amount, they may get an additional amount on their 2020 tax return.
A second round of payments was authorized in December 2020 and these will also be treated as advance credits on 2020 returns. A third round of payments is currently being debated in Congress.
Note that the stimulus payments are NOT taxable.
Other Provisions:
- Required Minimum Distributions (RMDs) from retirement accounts were waived for 2020.
- Charitable contribution deductions of up to $300 per return are allowed for filers taking the standard deduction.
- The medical expense deduction threshold was reduced to 7.5% from 10% of adjusted gross income.
- The deduction for mortgage insurance premiums was extended for one year.
PPP Loans
Another significant provision in the Covid relief legislation was the Paycheck Protection Program ) PPP which allowed small businesses to obtain low cost loans if they were impacted by the Covid 19 pandemic. A key feature of the loans was that they could be forgiven if the funds were used for payroll, business rent, and some other expenses.
For tax purposes, the forgiven loan amount is NOT taxable. Recent legislation also now allows that any of the expenses used in computing the forgiveness ARE deductible.
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