Finally, after months of negotiations and partisan disputes, Congress passed on Monday the new, $900 billion, Coronavirus Relief package. The second stimulus relief package is a part of a ~$2.4 trillion spending bill to fund the federal government through the end of September 30, 2021 and is supposed to be signed by President Trump as soon as it gets to the White House. In addition to new provisions, the new bill has kept some provisions of the CARES Act that was passed earlier this year. However, there were some significant changes you need to be aware of. Let's look at important highlights of the new bill for individuals and small business owners.
Individuals & Families
Stimulus Checks
Unfortunately, the stimulus check that so many people have been waiting for has been cut in half. Also, the eligibility rules are now stricter than previously. Below are the new income limits threshold and check amounts to be received:
Single filer in 2019: If you earned less than $75,000 expect to receive $600. If your income exceeded $87,000 - expect no payment at all (vs $99,000 in the CARES Act)
Married and filed taxes in 2019 jointly: If your earned income was less than $150,000 you will receive $1,200. The cutoff is $174,000 (vs $198,000 in the CARES Act)
Dependent under age 17 are also eligible for a $600 payment (vs $500 in the CARES Act)
Considering changes in income limits, I encourage you to check this calculator to estimate your payment. The IRS expects to send direct payments before December 31, 2020. Paper checks and debit cards will be processed before January 15, 2021
Federal Unemployment Benefits
The bill partly restores the federal unemployment payment on top of state benefits. But as with stimulus checks, this time the amount of the federal benefit has been cut in half compared to the CARES Act payment. If you lost your job or got furloughed, expect an additional $300 a week federal payment starting December 26, 2020 through March 14, 2021 (for the total of 11 weeks).
Help to Renters
The nationwide eviction moratorium has been extended by 1 more month, through the end of January 31, 2021. If your tenants haven't been paying the rent, there is a chance that they may pay you back soon. The new bill provides a $25 billion assistance to households to help them pay past-due rent, future rent, and other home-related expenses.
Earned Income Tax Credit & Child Tax Credit
If your family income has been significantly reduced due to COVID-19, the bill allows families to receive earned income tax credit and child tax credit.
Student Loan Forbearance
If you have a federal student loan be prepared to resume your payments starting February 1, 2021 - the new bill hasn't extended the freeze on federal student loan payments.
$300 Charitable Donation Is Extended
I previously mentioned that you can get a $300 special deduction for a cash donation made to qualifying charities before December 31, 2020. The new stimulus bill extends this universal charitable deduction through 2021. Even better, in 2021 married couples will now be able to deduct $600 above the line for 2021 donations (vs. $300 in 2020)
Small Businesses
Paycheck Protection Program (PPP) If you own a privately held and didn't receive PPP money in the first round, the new bill provides additional funding for your business. You will also be able to apply for a second (repeat) round of PPP (up to $2 million in forgivable loans) if you are any business concern, nonprofit organization, housing cooperative, veterans organization, Tribal business concern, eligible self-employed individual, sole proprietor, independent contractor, or small agricultural cooperative” that meets the following three requirements:
Employs 300 employees or less
Has or will use the full amount of your first PPP loan, and
Had gross receipts during the first, second, third, or, only with respect to an application submitted on or after January 1, 2021, fourth quarter in 2020 that demonstrate not less than a 25% reduction from the gross receipts of the entity during the same quarter in 2019.
The CARES Act previously set a threshold of 500 employees or less, 50% reduction from gross receipt, and a maximum $10 million loan limit. Please talk to your banker ASAP and find out how you can apply for the new loan as funds can be depleted very quickly.
In addition to that, the expenses paid for with forgiven loans will be deductible
New EIDL Grants
If you applied for an EIDL grant earlier in the year, you can still receive the full $10,000 grant (minus any amount already received) even if the EIDL application were not approved.
To qualify for the new EIDL grant, your business must:
Be located in a low-income community
Have suffered an economic loss greater than 30%
Employ not more than 300 employees
Be qualified as an eligible entity as defined in the CARES Act: a small business, cooperative, ESOP Tribal concern, with fewer than 300 employees; an individual who operates under as a sole proprietorship, with or without employees, or as an independent contractor; or a private non-profit or small agricultural cooperative
Have been in operation by January 31, 2020
Be directly affected by COVID-19
Please keep an eye for additional details from the Small Business Administration on how to apply.
Conclusion
While the new bill certainly provides so much needed financial relief for individuals and small businesses, I don't think that politicians clearly realize the true level of hardship that many people and business owners are in due to COVID-19. To me personally, the magnitude of help for individuals is far from want many people really need. I think the politicians should have at least kept the stimulus check at the same level of $1,200 as previously instead of passing the "three-martini lunch" deduction (a tax break for business meals). But given current circumstances, any help is better than nothing. And despite all the flaws of the new rescue bill, there is something that makes me think the bill, if it passes through the President, is going to be a good holiday gift for millions of Americans.