“The Consolidated Appropriations Act of 2021” was finally signed into law by Trump on Sunday night, December 27. In addition to the $600 per taxpayer and dependent child Economic Impact Payment (discussed here), the Act includes the following items that affect Form 1040 (and 1040-SR) filers -
FOR 2020 RETURNS
Taxpayers can use their 2019 income to determine eligibility for and calculate the 2020 Earned Income Credit and Additional Child Tax Credit if it results in a bigger credit than actual 2020 income.
FOR 2021 AND BEYOND RETURNS
* Business-related “food or beverages provided by a restaurant” are 100% deductible for 2021 and 2022 (remember - employee business expenses, including employee-paid business meals, are no longer deductible on Schedule A).
* The "above-the-line" deduction of up to $300 per taxpayer for qualifying charitable contributions for taxpayers who do not itemize on Schedule A, a per return deduction for 2020, is per taxpayer for 2021. The maximum deduction for a married couple filing a joint 2021 return is $600.
* The 7½% of AGI exclusion for medical expenses on Schedule A is made permanent
* The MAGI-based phase-out amounts for the Lifetime Learning Credit are permanently increased to equal the amounts for the American Opportunity Credit.
* The lifetime $500 credit for 10% of qualified residential energy purchases is extended for 2021.
The Act also included new and extended business and payroll tax relief and other non-1040 items.
TTFN
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