How Does the New Stimulus Package Affect You? The newest stimulus bill has brought significant changes not only to entrepreneurs but individuals, too

Like the CARES Act, the newest stimulus bill has brought significant changes not only to entrepreneurs but individuals, too. While some relief is immediate, some updates last through 2022. As with any new tax opportunity, it's crucial to examine each and determine how you can maximize them. Here's how the new bill will affect you.

Changes for entrepreneurs

The bill provided many changes to the Paycheck Protection Program. One of the biggest is that PPP expenses are now tax-deductible, and the forgiven loan is still not taxable income. However, small business owners need to do the due diligence to confirm if their state plans to follow suit. Not all states conform to Federal Tax Law, so it's likely that states that need tax dollars (like California or New York) won't conform. Business owners in those states should plan on higher state taxes this year.

Entrepreneurs also have access to more loans and grants. There is $284 billion available in PPP loans for businesses with less than 300 employees and whose revenue was down 25% or more in 2020. In addition to more PPP funds, there are now $20 billion in Economic Injury Disaster Loan grants available to businesses with 300 or fewer employees in low-income communities that have lost more than 30% of revenue.

More updates in the bill include:

• Increasing business meal deductions to 100% for the 2021 and 2022 tax years.
• Tax extenders like extending and increasing the employee retention tax credit to 70% of qualified wages prior to July 1, 2021.
• Additional tax extenders include the Families First Coronavirus Response Act Credit, Work Opportunity Tax Credit, New Markets Tax Credit, alternative fuel credits and the residential energy property credit. Visit the Tax Foundation's website for a full list of extensions.
• The bill includes a one-month extension of the nationwide eviction moratorium, but also provides $25 billion in rental assistance. If you own rental properties, be sure to share the details of the program with your tenants who have struggled to make payments due to the pandemic.

Changes for individuals

While the $600 stimulus checks and extension of the Pandemic Unemployment Assistance of $300 a week through mid-March are sure to provide relief to many, there are additional tax opportunities to maximize. Key elements from the CARES Act and new stimulus bill include:

• In 2021, those who take the standard deduction can write off $300 in charitable donations or now $600 for married taxpayers that file a joint return. In addition, taxpayers that itemize can deduct up to 100% of their adjusted gross income in 2021. However, this only applies to gifts of cash directly to charities.
• Also, taxpayers with a Flexible Savings Account with unused funds can roll balances from the 2020 tax year into 2021, and 2021 balances can be rolled into 2022.

As you work with your tax advisor for the 2021 tax season, make time to understand the changes made in the new stimulus package and how you should update your 2021 plan accordingly. Thorough tax planning is the key to reducing your taxes, so don't miss the chance to make the most of these opportunities.