PANDEMIC RELIEF HAS LOTS OF TAX CREDITS

April 25, 2021 - Douglas Myser

Pandemic relief has lots of tax credits. The recently passed $1.9 trillion Pandemic Aid Bill is best known for the $1400 checks that most Americans will receive as a result of the bill, passed by Congress and signed into law by President Biden. The bill is designed to get Americans back on their feet, after struggling with the impact of the Covid-19 crisis that has engulfed the nation and world over the last 15 months. What most observers are unaware of are the tax credits that also are in the massive bill, designed to give Americans support during the coming months, a bridge to better times. Pandemic relief has lots of tax credits.

Child and dependent care credit. The act makes various changes to the Sec. 21 child and dependent care credit, effective for 2021 only, including making it refundable. The credit will be worth up to $4000 for one qualifying individual and up to $8000 for two or more. Credit reduction will start at household income levels over $125,000. For households with income over $400,000, the credit can be reduced below 20%. The act also increase the exclusion for employer provided dependent care assistance to $10,500 for 2021.

Family and sick leave credits. The act codifies the credits for sick and family leave originally enacted by the Families First Coronavirus Response Act, as Sections 3131, 3132 and 3133. The credits are extended to September 30, 2021. These fully refundable credits against payroll taxes compensate employers and self employed people for coronavirus related paid sick leave and family and medical leave. The act increases the limit on the credit for paid family leave to $12000. The number of days a self employed individual can take into account in calculating the qualified family leave equivalent amount for self employed individuals increases from 50 to 60. The paid leave credits will be allowed for leave that is due to a COVID-19 vaccination. The limitation on the overall number of days taken into account for paid sick leave will reset after March 31, 2021. The credits are expanded to allow 501(c)(1) government organizations to take them.

The employee retention credit is also expanded under the act. It extends the act through the end of 2021.