In the last days of December, President Trump signed a new stimulus package that provides additional support to individuals and businesses impacted by the ongoing COVID pandemic. Our team of financial planners and analysts have followed the legislation closely and point out the following key components of this newest round of stimulus below.
Additional Stimulus Payments to Individuals
Individuals with incomes below $75,000 and families with incomes below $150,000 will receive an additional $600 per person. Dependent children will also qualify for a flat $600 payment. Similar phase-out ranges apply for individuals and families with incomes slightly above the limits. The government will use 2019 earnings to calculate eligibility, as everyone should have filed 2019 returns by this time.
Extended Unemployment Benefits
Recipients of unemployment insurance will receive up to an additional $300 beginning immediately and effective through March 14, 2021. The unemployment program for independent contractors and freelancers, called "Pandemic Unemployment Assistance," has also been expanded with an additional $100 per week, and has similarly been extended through March 14, 2021.
FOR BUSINESS OWNERS
Easier Forgiveness for PPP Loans Under $150,000
The new legislation mandates that the Small Business Association simplify the process for forgiveness of loans under $150,000. The simplified application must fit on one page and will include a certification from the business owner that the funds were used properly and are eligible for forgiveness. It should not include any calculations.
Clarification on Taxation of Forgiven PPP Loans
The new legislation clarifies that the forgiveness of a PPP loan will not be taxable to the business owner. In addition, business owners will still be able to deduct the payroll expenses and other qualifying expenses that the PPP funds were used to pay for during the PPP period.
New Round of PPP Loans Available to Qualifying Businesses
The new stimulus creates additional funding of $284 billion for Paycheck Protection Program (PPP) loans. These new loans are referred to as "second draw loans" and, as indicated, are available to both first-time applicants as well as those who participated in the first round of PPP loans. To qualify, a business must be able to show a quarterly revenue decline of 25% or more for at least one quarter of 2020, relative to the same quarter in 2019. These new PPP loans are available to businesses with under 300 employees.
The loan size is 2.5x average 2019 monthly payroll for most businesses, and 3.5x average monthly payroll for restaurants and certain food businesses. The maximum loan size is $2,000,000. To achieve forgiveness, at least 60% of the loan amount must be used toward payroll costs over a 24-week period.
Additional funding to support the entertainment, travel and restaurant industries, schools, vaccine distribution and hospital reimbursements, rental and nutrition assistance has also been included in this bill, in addition to a multitude of other provisions. (Your Allegiant team will cover many of the tax changes in a separate Feature.) The $900 billion COVID-19 relief package includes many provisions to research and consider how they apply to you or your business. If you would like to discuss any of the components of the new stimulus package, please do not hesitate to contact your Wealth Advisor. We wish you a very Happy New Year!
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