Consolidated Appropriations Act as it Relates to Individuals

At the end of December 2020, President Trump signed the Consolidated Appropriations Act (CCA). While much of the CCA is directed at businesses, there are several key components related to individual taxpayers.  

Much of the CCA relates to clarification or modification of previous coronavirus legislation.  Other portions of the act relate to extending certain expiring provisions.   The following are matters included that pertain specifically to individual taxpayers:

1. Deferred Employee Payroll Tax Extension—The payback time for those individuals who chose to delay paying their payroll taxes for the period of September 1, 2020 through year-end 2020 has been extended.  The original due date for having those deferred taxes fully paid was April 2021.  The payback due date has now been extended to December 31, 2021.
2. Additional 2020 Recovery Rebates—Similar to the spring program of direct “rebate” payments to taxpayers, an additional stimulus payment of up to $600 per taxpayer and qualifying child is being made in January 2021.  AGI and age limitations are in effect.  As with the prior program, this rebate is a prepayment toward a credit that will be shown on an individual taxpayer’s 2020 income tax return.  The filing of a taxpayer’s Form 1040 will allow another opportunity to obtain this credit toward 2020 taxes owed, if he/she is eligible and did not receive the direct payment already.
3. Educator Expense Adjustment—The $250 adjustment to gross income for teachers’ out-of-pocket expenses for supplies for their classrooms has been expanded to include equipment relative to COVID-19 supplies.
4. Emergency Financial Aid Grants—College students who received qualified emergency financial aid grants from their institutions of higher learning will not need to report those grants as income; nor will these grants serve as a reduction in calculating educational tax benefits.
5. Medical Deductions—The itemized deduction threshold of 7.5% of AGI has been made permanent beginning in 2021.
6. Charitable Contribution Changes Extended—Under the CARES Act, a temporary increase for deductibility of cash charitable contributions from 60% of AGI to 100% was enacted for 2020 tax returns.  Also, non-itemizing taxpayers may claim a $300 above-the-line charitable contribution on their 2020 tax returns.  The CAA has extended both of those provisions to tax year 2021.
7. Miscellaneous Extenders—Some other year-end provisions included in CAA:
   1. Mortgage insurance premiums treated as qualified resident interest (extended through 2021);
   2. Credit for new qualified fuel cell motor vehicles (extended through 2021); and
   3. Residential energy efficient property credit (extended through 2022).

While the CAA is more than 5,000 pages long, it is our hope that this very high-level summary provides individual taxpayers with some knowledge of what specifically pertains to them.  As always, please don’t hesitate to consult your Schneider Downs team to discuss these or other matters in further detail.