The Consolidated Appropriations Act, a.k.a. Coronavirus Stimulus 2.0, was signed into law in December 2020. This Act expanded on the CARES Act, which was created to help people, businesses, and nonprofit organizations facing economic hardship during the coronavirus pandemic.
While much of the bill focuses on enhancements for struggling small businesses impacted by the pandemic, some of tax changes featured in Coronavirus Stimulus 2.0 may affect you.
- Payments of $600 were made to all eligible individuals, $1,200 to married individuals, and $600 for each qualifying child. However, payments gradually phase out for those with incomes above $75,000 (single taxpayers), $112,500 (taxpayers filing as head of household), and $150,000 (married couples filing jointly).
- Continues the CARES Act provision to allow full tax deductibility for all cash gifts up to $300, regardless of whether you itemize or not, and expands it to $600 for married couples filing jointly in 2021. For individuals who itemize, cash gifts will be tax deductible up to 100% of your adjusted gross income (up from 60% in previous years).
- Allows you to carry forward into 2021 unused Flexible Spending Account balances remaining from 2020.
- The 10% floor on medical deductions that was set to take effect in 2021 will now permanently remain at 7.5% of adjusted gross income.
- Allows full deductibility of all meals and entertainment expenses at restaurants for 100% of the cost.
- Replaces the Tuition and Related Expenses deduction for education with a Lifetime Learning Credit.
However, Coronavirus Stimulus 2.0 does NOT extend the CARES ACT waiver for required minimum distributions (RMD) for the current tax year if you are 70 ½ or older. Therefore, if you are of RMD age in 2021, you must resume RMDs for 2021 and continue for every year after. RMDs were waived for beneficiary IRAs as well in 2020, but will need to resume also in 2021 for certain beneficiaries.
Consult your tax advisor for more information about how the Coronavirus Stimulus 2.0 could potentially impact you.