News and Commentary

What’s in the Second Round of COVID-19 Relief for High-Net-Worth Business Owners? By Robert Mark Weiss, CFA

The Consolidated Appropriations Act of 2021, signed into law on Dec. 27, 2020, provides a second round of economic relief to individuals, businesses and nonprofits that continue to struggle in the wake of the COVID-19 pandemic. While the law was written to support those in the most dire circumstances, it provides several generous benefits to those taxpayers in the highest income brackets. Following is a brief overview of some of those provisions.

More PPP Loans

The stimulus package allocates $284 billion to a second round of forgivable Paycheck Protection Program (PPP) loans for eligible businesses, sole proprietors and independent contractors, including those that received loans in 2020 during the first round of funding.

Under the revived program, referred to as PPP2, borrowers may qualify for loan forgiveness when they use loan proceeds for payroll costs and an expanded list of operating expenses that now include costs for worker protections, such as PPE, sneeze guards and air filtration systems; covered property damages; and supplier costs, cloud computing services and similar software essential to business operations.

Yet, the most significant change in the new legislation is the opportunity it provides loan recipients to deduct from taxable income those qualifying expenses they paid for with forgiven and tax-free PPP1 and PPP2 loan proceeds. In other words, borrowers not only receive loan proceeds free of tax, but they also gain the ability to reduce their taxable income by claiming deductions for the proceeds they use to pay for qualifying loan expenses. This provides wealthy investors and business owners with an unprecedented tax advantage, since the IRS typically prohibits taxpayers from using tax-free government grants as deductions.

Tax Credits and Deductions for Businesses and Individuals

The new stimulus package extends, and, in some cases, increases valuable tax credits first introduced in 2020 for employers, including, but not limited to:

The Act also repeals the charitable deduction limitations for cash donations corporations and itemizing taxpayers make to nonprofit organizations, allowing those taxpayers to fully deduct 100 percent of charitable donation in 2020 and 2021. For taxpayers that do not itemize their deductions, the new law allows a deduction of $300 (or $600 for married couples fling jointly) for charitable donations of cash made through 2021.

Finally, the law permanently reduces the income floor individuals must meet to deduct medical expenses. Beginning in tax year 2020, individuals with significant medical expenses may write off those costs that exceed 7.5 percent of adjusted gross income (AGI) (versus 10 percent under prior law).

About the Author: Robert Mark Weiss, CFA, is a regional director and financial planner with Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs, and a registered representative with Raymond James Financial Services. For more information, call (941) 308-1120 or email
info@provweath.com.

Provenance Wealth Advisors (PWA), 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.

Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC. Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors + CPAs. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory and Financial Planning Services are offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors, a Registered Investment Advisor.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the advisors of PWA and not necessarily those of Raymond James. The information contained in this report does not purport to be a complete description of the developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Investments mentioned may not be suitable for all investors.

You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Please note that changes in tax laws may occur at any time and may have a substantial impact on each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters.


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