With the coronavirus relief bill being signed into law by President Donald Trump on Dec. 27, here’s what we know at this point about the Covid stimulus package 2.0.
A second round of stimulus payments is set to be disbursed. Each adult and dependent child under the age of 17 will receive a stimulus payment of $600. Any dependent over the age of 17 that was claimed on the tax return will not qualify for the payment. The credit will phase out once adjusted gross income (defined here by the IRS) for single taxpayers exceeds $75,000 or $150,000 for married filing joint. The checks are based on your 2019 tax filing information. The timing and receipt of the payment are not set forth yet, but Congress states it will be paid expediently and as a credit on your 2020 tax return. Also, since the checks are to represent an advance credit on your 2020 filing, a refund or balance due will be calculated on your 2020 tax filing if you do not receive the proper amount. However, if you received more than you were to receive, it will not have to be paid back.
On the topic of stimulus payments, here’s some important information about the $1,200 stimulus payment from this spring and if it will factor into your 2020 tax return.
There was a newly created charitable deduction of $300. It has been further clarified that it is $600 for married couples.
Previously a person over 70 ½ was able to contribute $100,000 directly to charity tax-free. For tax year 2020 and 2021, anyone over the age of 59 ½ can contribute an unlimited amount directly to charity via their retirement account.
FSA and Dependent Care benefits
Under the new bill, unused Flex Savings Accounts (FSA) and dependent care funds from 2020 can be carried over to 2021. Previously, unused amounts were forfeited.
Teachers will be qualified to use the $250 classroom expense deduction on personal protective equipment for their students or themselves.
Business Meals and Beverages
Effective immediately, and for tax year 2021, the entire expense related to business meals is 100% deductible. This includes alcohol. The qualification for this expense is that the expense must be provided by a restaurant.
Deductible Medical Expenses
This bill has permanently set the amount of medical expenses to be at 7.5% of adjusted gross income.
If you have specific questions about the second coronavirus relief package or how any of the measures may impact your situation, please don’t hesitate to reach out to us by email or by filling out this contact form.
Stimulus Payment Update
Since this post was originally published, there has been more information released about the stimulus payments, which can be found below.
The stimulus payment is based on your 2019 adjusted gross income and will pay $600 for single taxpayers earning $75,000 or less with a maximum adjusted gross income of $87,000. Head of household tax filers will qualify for the full amount if they earn under $112,500 with a maximum adjusted gross income of $124,500. Married filing joint taxpayers will receive the full amount if they earn under $150,000 with a cap of $174,000. If you earn more than the income maximum for your filing status, you will receive a partial payment dropping by $5 for every $100 above the limits.
The $600 payment is for the taxpayer, spouse, and dependent children under the age of 17. Dependents over 17 do not qualify for a payment. Compared to the prior stimulus payments, the amount paid for dependents is increasing from $500 to $600.
When Will I Receive My Payment?
The IRS has said that payments should be issued within three weeks. They have also stated that the payout on the second round of stimulus payments should be smoother than the first round. The legislation signed by President Trump dictates that the payments be made by January 15, 2021.
I Thought President Trump Was Refusing To Sign The Bill Due To The Payment Amount?
Legislation is in progress to increase the payment to $2,000 per taxpayer. It is unknown whether there will be a third economic payment because the House would have to pass it. Stay tuned for tuned for more information on this.