The Consolidated Appropriations Act provides over $2.3 trillion in funding which includes $900 billion in stimulus relief for the COVID-19 pandemic. The CAA was signed into law on December 27, 2020. Along with the newly enacted CAA comes new federal income tax breaks for businesses while also extending other breaks that were going to expire by the end of last year.
As a small business owner, it’s important to take advantage of what’s available to you especially during these unexpected and difficult times. Business tax preparation can be daunting unless you’re fully educated on all of the necessary facets. We’ve broken down some of these new CAA tax breaks into a couple of different categories.
- Under the new law, commercial building owners can now claim permanent deductions for energy-efficient improvements to HVAC units as well as lighting features. An inflation adjustment will also be added for future tax years (2021 and beyond).
- If you’re a residential home manufacturer you are now able to claim a credit of $1,000 or $2,000 if your newly purchased 2021 homes meet certain energy-efficiency standards.
- Does your business provide alternative refueling options for employees who are electric car drivers? You can now claim a federal income tax credit of up to 30% of that installation cost. This applies to 2021 qualifying purchases as well. The CAA is also allowing businesses to claim a federal income tax credit for purchasing electric vehicles in 2021. These credits will depend on the size and fuel economy of the vehicle.
- In order to help struggling restaurants during COVID-19, the new CAA allows businesses to deduct 100% of business-related restaurant meals in 2021 and 2022. This applies to take-out food as well as dine-in meals as restaurants start to open their doors again, so be sure to take advantage of it!
- The new CAA is extending empowerment zone (economically distressed communities) breaks for another five years while also discarding the capital gains tax deferral break for sales starting in 2021. In addition, this will end first-year depreciation rules for certain properties in service in the 2021 tax year and going forward.
- As an individual or corporate taxpayer, you can now claim the new markets 39% federal income tax credit through 2025. This credit is for business and real estate investments in low-income communities.
- If an educational assistance plan under Section 127 is available to your employees, then listen up! The new law extends these tax breaks to qualifying loan payments through 2025. Keep in mind the plan maximum is $5,250.
- Under the CAA, businesses that hire members of WOTC targeted groups can claim the work opportunity tax credit now through 2025. Some of the targeted groups included are qualified veterans, ex-felons, summer youth employees, designated community residents, and more.
These are only some of the tax breaks available through the new CAA. Make sure you do your research to stay as up-to-date as possible on what you and your business can benefit from!
Whether you’re a small business or just looking to learn more about filing your taxes properly, we’re here to help you through the tax planning and tax preparation process. Feel free to contact us at 410-224-2600 and don’t forget we’re also offering virtual appointments. Book yours today!