I wanted to continue my series on tax planning for this year. Once again, most of the relevant tax law changes have not yet been signed into law.
As such, the changes I now describe may be altered in the near future. That being said, the following is currently in place for the 2021 filing season.
Paid Sick Leave Credits
Payroll credits are available for Paid Sick Leave. These credits cannot be taken in conjunction with a PPP Loan or the Employee Retention Credit. Advanced payments on these credits are possible with Form 7200 and they are taxable.
Given the choice between an ERC or the Paid Sick Leave credit, most are opting for the ERC, given the amounts involved.
Above-The-Line Deductions on Charitable Contributions
Taxpayers may deduct up to $600 above-the-line in charitable contributions on a MFJ Return if they do not itemize.
Qualified Business Income Deduction (QBID)
Taxpayers engaged in a qualified trade or business can again get up to a 20% deduction off of their income again in 2021. Notice how I said, “up to 20%”. This is by no means automatic.
There are four different categories of QBID income. Given your category, you may not get any deduction at all. Any deductions received are taken at the personal level on your 1040.
Let me leave you with this.
I’ve spoken to a few people in the real estate business who have asked us to help them apply for the EIDL Loan. Given the issues many are seeing in the economy, and the possibility of another real estate recession, many have decided to put in for an EIDL Loan before the upcoming deadline of 12/31/2021.
Their rationale is the fact that during a real estate recession, banks generally either stop or severely reduce their lending practices. At the height of the ’08 recession, very little money was available, other than “hard” money lent out at 2% interest monthly.
Given the 3.75% interest rate, and the two year deferral on payments, it’s hard to beat from a lending standpoint. The relaxed restrictions on allowing the newer EIDL loans to pay off new debt, makes it even more attractive.
If you’ve read me for a while, you know that I’m not a fan of debt. The happiest day of my life was the day I didn’t have any. We have to be careful when it comes to lending. It’s an easy way to go out of business.
But the attraction of financing at a low interest rate with a two year deferral on payments, coupled with reduced prices on a potential real estate recession, make the EIDL hard to beat for real estate professionals.
Just a thought.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, PPP Loan Forgiveness, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.