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Federal Tax Update

The 2021 Consolidated Appropriations Act (CAA) (P.L. 116-260,enacted Dec. 27, 2020) contains several measures providing new COVID-19 relief. Below are some of the highlights.

Business Meals Deduction

Current IRC Sec. 274(n)(1) limits the deduction for business-related food or beverages expenses to 50 percent of the amount otherwise deductible. However for only 2021 and 2022, the CAA allows a 100 percent deduction for business-related meals and beverages provided at a restaurant. This 100 percent deduction is allowed pursuant to Sec. 274(n) (2)(D), which was added to the IRC by Sec. 210(a) of the 2020 Taxpayer Certainty and Disaster Tax Relief Act (Act), enacted as Division EE of the CAA

Educator Expenses

The CAA requires the Treasury Department to issue regulations providing that personal protective equipment and other supplies used to prevent the spread of COVID-19 qualify for the educator expense deduction towards AGI under Sec. 62(a)(2)(D).

Child Tax Credit

Under the old law, this credit was $2,000 per qualifying child, but only $1,400 of that credit was refundable. For 2021 only, the

(ARPA) increases this credit to $3,000 per qualifying child or to $3,600 for a qualifying child under 6 years old. This new law also makes the child tax credit completely refundable. Under the old law, a qualifying child generally was the taxpayer’s qualifying child [defined in Sec. 152(c)] who had not attained age 17 [Sec. 24(c)]. The ARPA increases the maximum age of qualifying children to age 17 for 2021

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