Pandemic Relief Package for Individuals and Families – Round 2

Details of $900 billion relief package as it relates to individuals and families.

By: Tina M. Truby, CPA, Cover & Rossiter

(December 31, 2020) The Consolidated Appropriations Act, 2021 was signed into law on December 27. It includes the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA Act) that contains roughly $900 billion in additional funding for COVID-19 pandemic relief efforts. While almost $300 billion is slated for a second round of loans to certain small businesses (See Pandemic Relief Package for Small Businesses – Round 2), there are also benefits to be reaped for individuals and families:

Extension of Unemployment Insurance Compensation Benefits:
  • In practice, most states pay benefits for 26 weeks.  Federal unemployment assistance for anyone eligible to receive benefits, was originally extended for 13 weeks by the CARES Act. This assistance will be now be extended through March 14, 2021.
  • The federal extension of benefits also applies to those that had received assistance through the Pandemic Unemployment Assistance (PUA) program, which offered coverage to the self-employed, gig workers, and others in nontraditional employment.
  • Eligible individuals will receive an additional $300 in unemployment compensation beginning January 2nd and lasting through March 14, 2021.

As a reminder, all benefits received for unemployment assistance are federally taxable. Most states, including Delaware, follow this practice, but not New Jersey or Pennsylvania; those states do not impose state income tax on unemployment compensation.

Individual Stimulus Payments:
  • With no qualifying dependent children, individual US citizens with 2019 AGIs up to $75,000 or, if qualified to file as Head-of-Household and 2019 AGI is $112,500 or below, will receive $600 payment.
  • With no qualifying dependent children, married couples (or an individual whose spouse died during 2020) with 2019 AGI of $150,000 or below, will receive $1,200 payment.
  • Eligibility includes married couples where one spouse is a non-resident alien; a modification from the March 2020 CARES Act that also provides for retroactive eligibility for CARES Act stimulus payments.
  • $600 additional will be provided for each eligible dependent child under 17.
  • Those with income above these levels will receive a partial payment or one that is reduced by $5 for every $100 additional AGI thus phased out completely for an individual making $87,000 (with no children) or a married couple making $174,000. 

The payments are not taxable income but an advanced refundable income tax credit such that if you received less than the credit allows on your 2020 income tax return, because your determining 2019 income was higher, you will receive additional credit.  Conversely, if you have received more than the credit allows on your 2020 return, you will not have to pay back the excess. 

Charitable Contributions Provisions:
  • Under the CARES Act, non-itemizers were allowed an above-the-line $300 deduction for qualified cash contributions made during 2020. The Consolidated Appropriations Act 2021 allows this deduction through 2021 and increases the limit to $600 for married couples filing jointly.
  • For those itemizing, the Act extends through 2021 the deduction, from the provision of the CARES Act, of up to 100% of AGI for cash contributions made to qualifying charities.
Other provisions of the CRRSA Act include:
  • For 2020 and 2021, employers are allowed to designate that an employee’s unused Flexible Spending Account money can be carried over and used in the following year.  Likewise, the law allows employers to raise the last eligible age for children’s dependent care to 13, from 12, for the 2020 plan year.
Additionally, previously set-to-expire earlier provisions have been extended and include:

…through 2021:

  • Teachers’ expense for PPE and other supplies for preventing the spread of COVID-19 qualifies for application to the $250 above-the-line educator expense deduction retroactive to March 12.
  • Credit for energy efficient improvements to personal residences. (Lifetime limit of $500 applies)

…through 2023:

  • Credit for purchase of qualified energy-efficient property is increased from 22% to 26% and phase-out extended; Includes qualified solar electric or water heating property, fuel cell, small wind energy, and geothermal heat pump property.

…and, extensions made permanent:

  • 7.5% of adjusted gross income floor for deduction of medical expenses not reimbursed by insurance or otherwise.
  • Gross income exclusion for certain benefits provided to volunteer firefighters and emergency medical responders.
Summary:

We will update the information above as new information becomes available. If any of these provisions may affect you, please save a copy of this article with your 2020 tax preparation documents and be prepared to discuss with your tax preparer.

RELATED: Pandemic Relief Package for Small Businesses – Round 2

Tina Truby

Tina M. Truby CPA is a Senior Staff Accountant in Cover & Rossiter’s Tax Department. She joined the firm in 2017.