2020 Last minute year-end tax savings strategies and news

As a friendly reminder, here are some simple last minute year-end tax savings strategies for you and your business. In addition, the CARES ACT and other recently passed legislation has significantly changed many tax laws and provided beneficial changes. On December 21, 2020, The U.S. Senate and House of Representatives overwhelmingly passed a $900 billion COVID-19 relief bill Monday night that provides $600 stimulus payments to individuals, adds $300 to extended weekly unemployment benefits, and provides more than $300 billion in aid for small businesses in additional PPP funding (PPP2). Also addressed in the Consolidated Appropriations Act, 2021, was ensuring the tax deductibility for business expenses paid with forgiven Paycheck Protection Program (PPP) loan proceeds. This was recently a topic of debate in which the IRS stated all PPP funded expenses were non-deductible for PPP forgiven loans.

• PPP loan forgiveness – not taxable
• PPP funded expenses on forgiven loans – are now tax deductible!!!

The Consolidated Appropriations Act, 2021 also provided for individual economic impact payments as follows:

• $166 billion for economic impact payments of $600 for individuals making up to $75,000 per year and $1,200 for married couples making up to $150,000 per year, as well as a $600 payment for each child dependent.

Last minute year-end tax savings strategies

Business side:

• Cash basis businesses can hold cash deposits to deposit until after the year flips, so that you defer income recognition into 2021.
• Prepay expenses or vendors to accelerate deductions into 2020.
• Consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase your 2020 deductions even if you don’t pay your credit card bill until after the end of the year.
• In addition to section §179 expensing for 2020, both new and used fixed asset purchases are now eligible for 100% immediate expensing. So purchase any needed new or used automobiles, computers, equipment or office furniture needed in your business prior to the end of the year.

Individual side:

• Maximize HSA contributions. For the 2020 calendar year, the annual HSA contribution limit for self-only plans is $3,550 and family plans is $7,100.
• Maximize any contributions to your retirement plan – 401(k), IRA, etc.
• Liquidate any losing investments to offset any realized gains that you had earlier in the year.
• Give at least $300 to a qualifying charity. Most taxpayers can now deduct up to $300 in charitable contributions without itemizing deductions. Following tax law changes, the Coronavirus Aid, Relief and Economic Security Act allows cash donations of up to $300 made this year (by December 31, 2020) as above the line deductions (without having to itemize).

For help with your business, feel free to contact us at GRA CPA Orlando. Thank you for the opportunity to serve you and happy holidays!