In addition to the second stimulus checks for $600 per person that were announced as part of the Further Consolidated Appropriations Act (FCAA), the Act also contains tax reliefs for education, business meals, and help for those who did not receive the first stimulus check, reports Bambridge Accountants New York.
More individuals and families will also be able to claim the Earned Income Tax Credit and Child Tax Credit when they file their 2020 tax returns.
The FCAA allows for more people to claim for the Lifetime Learning Tax Credit. While the credit remains the same, 20% of qualified tuition during the tax year, up to $10,000, the income level at which the credit is phased out has been lifted. The level of income where the credit is phased out is increased from $59,000 to $80,000 for single filers and $118,000 to $160,000 for married filing jointly.
After 2017, the deduction for business meals was reduced to 50%. The FCAA allows for business meals to be expensed at 100% for tax years 2021 and 2022.
Both the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are based on individuals and families receiving a minimum amount of earned income. The FCAA allows for these individuals and families to use their 2019 income if that would give a larger EITC or CTC than their 2020 income. This is a temporary relief to help people where their income fell in 2020 due to coronavirus.
Finally, the FCAA allows for individuals who missed out on the first stimulus check for $1,200 to now claim that payment. Taxpayers who filed as married filing jointly and their spouse did not have a social security number, but had an ITIN, were denied the first stimulus check. The FCAA now corrects that and those individuals will be able to claim the $1,200 plus any amounts for qualifying children.
Alistair Bambridge, partner at Bambridge Accountants New York, explains: “For families and individuals where their income fell in 2020, if they have been laid off or had reduced work, these changes to the EITC and CTC will be welcome news and will ensure they still receive the credits they are entitled to. Many families rely on these credits to raise their children, and they are designed to lift them out of poverty.”