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Covid Stimulus Part II


After initially balking at some of its provisions, President Trump signed the Taxpayer Certainty and Disaster Tax Relief Act of 2020 on December 27, 2020. Among the provisions of this second Covid-19 stimulus bill are:

  • A $600 per family member payment. This payment is reduced by $5 for every $100 of Adjusted Gross Income (AGI) over $75,000 for single filers, $150,000 for married filing jointly filers, and $112,500 for Head of Household filers.

  • A provision noting if a business never applied for Round 1 of the Paycheck Protection Program (PPP), that window is now opened again.

  • A second round of PPP loans, albeit with more stringent qualifications that, generally speaking, indicate a business must have experienced at least a 25% drop in revenue in any quarter of 2020 compared to 2019.

  • Instructions that funds "forgiven" under PPP Round 1 will not count as taxable income.

  • Expanded categories of expenses for which PPP funds can be used.

  • An 11 week extension to federal unemployment benefits including an extra $300/week payment and an extension of funds to those individuals not normally covered by unemployment.

  • An extension of the deadline to repay deferred payroll taxes from April 30, 2021 to December 31, 2021.

  • A permanent restoration of the AGI tax hurdle rate from 10% back to 7.5% for medical expenses.

  • A provision for the removal of the "Tuition and Related Expense" deduction that replaces it with a higher phase-out range (equal to the American Opportunity Credit) for the Lifetime Learning Credit.

  • An extension for 2021 of the $300 above the line deduction for allowable charitable expenses. However, in 2021, the allowable deduction is increased to $600 for married filers.

  • Allowances for a 100% deduction for all business-related meal expenses in 2021 and 2022.

  • A provision allowing any unused 2020 FSA funds to be used in 2021 and any unused 2021 funds to be used in 2022.

What's not included?

  • No waiver of Required Minimum Distributions (RMDs) in 2021.

  • No further student loan relief.

All-in-all, there's likely something in the bill for everyone. President-elect Joe Biden has already referred to this legislation as a "down payment" on future stimulus, so it seems relatively clear the incoming president will very quickly angle for even more money. Again, my November missive comes to mind and investors may be wise to review it. It seems, whether you like it or not, we are increasingly heading down the road of Modern Monetary Theory and what the Wall St. Journal called a few days ago, "The Era of Non-Stop Stimulus."

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