Student loan interest: Can you deduct it on your tax return?
Many taxpayers with student loans have been hard hit by the economic impact of COVID-19. The CARES Act contains some help. It allows borrowers with federal student loans to stop making monthly payments until Sept. 30, 2020. If you do make student loan payments, you may be able to deduct the interest on your tax return, depending on your income and subject to certain requirements. The maximum amount of student loan interest you can deduct each year is $2,500. For 2020, the deduction is phased out for married taxpayers filing jointly with adjusted gross income (AGI) between $140,000-$170,000 ($70,000-$85,000 for single filers). The deduction is unavailable for taxpayers with AGIs above that.
IRS releases 2021 amounts for Health Savings Accounts
The IRS recently released the 2021 inflation-adjusted amounts for Health Savings Accounts (HSAs). For calendar year 2021, the annual contribution limitation for an individual with self-only coverage under a HDHP is $3,600. For an individual with family coverage, the amount is $7,200. This is up from $3,550 and $7,100, respectively, for 2020. For calendar year 2021, an HDHP is a health plan with an annual deductible that isn’t less than $1,400 for self-only coverage or $2,800 for family coverage. In addition, annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) can’t exceed $7,000 for self-only coverage or $14,000 for family coverage.
Attuning your social media strategy to the pandemic
Social media was important for businesses before the novel coronavirus (COVID-19) pandemic. It’s now become essential to maintaining visibility, building goodwill and perhaps even generating a bit of revenue. But the social media strategy you deployed before the crisis may no longer be effective or appropriate. Start by reviewing your approach to social media so you can identify what adjustments may be necessary. Avoid hard-sell tactics; focus on being helpful and supportive. Customers value brand consistency, so you probably shouldn’t change the look and style of your posts. Seek out opportunities to positively engage with those who follow your accounts. Contact us for more info.
Fortunate enough to get a PPP loan? Forgiven expenses aren’t deductible
The IRS has issued guidance clarifying that certain deductions aren’t allowed if a business has received a Paycheck Protection Program (PPP) loan. Specifically, an expense isn’t deductible if both: 1) the payment of the expense results in forgiveness of a loan made under the PPP, and 2) the income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. IRS Notice 2020-32 states that “this treatment prevents a double tax benefit.” However, two members of Congress say they’re opposed to the IRS stand on this issue. They say they’ll seek legislation to make certain expenses deductible. Stay tuned.
Did you get an Economic Impact Payment that was less than you expected?
Did you get an Economic Impact Payment (EIP) that was less than you expected? The federal government is sending EIPs to help mitigate the effects of COVID-19. If you’re under a certain adjusted gross income (AGI) threshold, you’re generally eligible for the full $1,200 ($2,400 if married filing jointly). And if you have a “qualifying child,” you’re eligible for an additional $500. Some people have received EIPs for less than they were expecting because they make too much money to receive the full EIP. Others may think their children are eligible for a payment and they aren’t. Still others may have debts, such as past-due child support or garnishments from creditors, that reduced their EIPs.
How to succeed at virtual team building
Thanks to affordable technology, more and more companies have been allowing employees to work remotely. And, with the onset of the pandemic, many businesses have had to mandate that employees work from home. As a result, virtual team building has become even more critical. Make sure every remote team develops and follows processes that produce results consistent with those generated on your physical premises. Also, reinforce that your expectations are the same whether an employee works remotely or on-site. You can help remote workers feel more connected by regularly holding Web-based meetings, as well as by holding meetings specifically geared toward team building. Contact us for more info.
There’s still time to make a deductible IRA contribution for 2019
You still have time to make your 2019 traditional and Roth IRA contributions. The deadline is generally April 15 but because of the novel coronavirus (COVID-19) pandemic, the IRS extended the deadline until July 15, 2020. If you qualify, deductible contributions to traditional IRAs can lower your 2019 tax bill. Even nondeductible contributions can be beneficial because of tax-deferred growth. If you’re eligible, the 2019 contribution limit is $6,000 (plus $1,000 for those age 50 or older on Dec. 31, 2019). However, your deduction or contribution may be reduced or eliminated based on your income. Contact us to learn more about retirement saving in your situation.
Business charitable contribution rules have changed under the CARES Act
Many businesses are donating to charity in light of the pandemic. In order to encourage giving, the CARES Act made some changes to the rules. Under one change, the limit on charitable deductions for corporations (generally 10% of modified taxable income) doesn’t apply to qualifying contributions made in 2020. Instead, a corporation’s contributions, reduced by other gifts, can be as much as 25% of modified taxable income. No connection between contributions and COVID-19 is required. In another change, for food inventory contributions made in 2020, the deduction limit increases from 15% to 25% of taxable income for C corporations and 15% to 25% of the net aggregate income for other businesses.
New $2 Million Threshold Necessity of Loan Safe Harbor and Adequacy of Repayment if Necessary
Paycheck Protection Program (PPP) Update The SBA just produced a new FAQ on May 13, 2020 (question #46) with the following question: “How will SBA review borrowers’ required good- faith certification concerning the necessity of loan request?” “. . . any borrower that, together with its affiliates who received PPP loans with an original principal […]
Paycheck Protection Program (PPP) – New Considerations to Navigate in Uncertain Times
Just as a lighthouse warns a ship in foggy or stormy conditions of landfall ahead your trusted advisors here at Polk and Associates can serve as your beacon to assist your business during these uncertain and often confusing times. Especially regarding the ever-changing nature of the PPP loan programs. Since the PPP loan program opened […]
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