Tax Highlighter - January 12, 2021

Our tax advisors are working hard to stay up-to-date on tax legislation and to help you understand how certain tax laws may impact your individual, business, estate, or gift taxes. Below are some recent highlights to be aware of.

Business Meal Deductions

Under the Tax Cuts and Jobs Act (TCJA), expenses relating to food and beverage were limited to 50% through 2025. The recent COVID-19 stimulus legislation has removed this limitation and now allows full deduction of these expenses for amounts paid or incurred after December 31, 2020 and before January 1, 2023. This new law also allows for takeout and delivery meals for business to be deducted. Aside from removing the 50% limitation, it’s important to note that the legislation doesn’t change the rules for business meal deductions. Talk to your tax advisor for clarification and about how to account for and document this deduction correctly.

Section 179 Conformity for Minnesota

Minnesota tax laws were changed to provide conformity with federal business expensing rules under Section 179 of the Internal Revenue Code (IRC). Businesses are able to deduct the entire cost of their property in one year rather than spreading it out over 5 years. This is a big win for MN businesses and farmers! Read more.

SBA Loan Payments are Non-Taxable

Included in the CARES ACT was a temporary payment subsidy for businesses with a non-disaster SBA loan. Under this provision, the SBA would make six months of principal and interest for borrowers with SBA loans. These payments are now considered non-taxable income to the borrowers under the COVIDTRA (COVID-related Tax Relief Act of 2020). Be sure you speak with your tax advisor if you were the recipient of SBA payment subsidies.

COVID-19 Business Relief Payments: Aid for Restaurants, Bars, Gyms, and Bowling Centers

Minnesota has passed an aid bill for restaurants, bars, gyms, and bowling centers. The Department of Revenue will begin mailing out payments in mid-January 2021. You do not need to apply for this aid and eligible businesses should have received notification though their e-Services account and by mail on December 31, 2020. Learn more about eligibility and payment amounts.

Key PPP Loan Issues Addressed by COVID-19 Relief Bill

On December 21, 2020, the U.S. Senate and House of Representatives passed a $900 billion COVID-19 relief bill which provides additional aid for small businesses, as well as more assistance to individuals. This bill also provided some clarification around the deductibility of expenses and the Paycheck Protection Program in the first draw and extended that deductibility into the second draw. Read more.

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If you have any questions about these or any other tax topics, please contact your AEM Tax Advisor.

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