2021 CARES Act Taxpayer Highlights

Don’t Overlook These Cash-Generating Opportunities!

Employer Payroll Tax Deferral

Employers and self-employed individuals can defer payment of the employer’s share (6.2%) of the Social Security payroll tax, but the deferred amount must be repaid in equal installments by December 31, 2021, and December 31, 2022. For this year-end, make sure that at least one-half of the deferred amount is repaid by December 31, 2021.

RMD Rules Temporarily Waived

The required minimum distribution (RMD) rules for certain defined-benefit contribution plans and IRAs are waived for the 2021 calendar year.

Above-The-Line Charitable Education

For 2021, taxpayers are entitled to an above-the-line deduction of up to $300 for cash contributions to churches and charitable organizations (and $600 for married taxpayers filing jointly), but only if they take the standard deduction. Normally, charitable deductions are only available to taxpayers that itemize, so this relief provision benefits those taxpayers that take the standard deduction.

Increased Income Limitation on Charitable Contributions

The CARES Act increases the adjusted gross income (AGI) limit for cash contributions made in 2021; individual donors can now deduct cash charitable contributions in an amount up to 100% of their AGI (increased from 60%). For corporations, the limit increased from 10% to 25% of taxable income.

Exclusion From Income of Employer Payments of Student Loans

For 2021, employers may contribute up to $5,250 toward an employee’s student loans, and the payment will not be taxable to the employee. The cap applies to this new student-loan repayment benefit as well as other educational assistance.

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No action should be taken without advice from a Withum Tax Professional because tax law changes frequently, which can have a significant impact on this guide and your specific planning possibilities. Reach out to discuss your individual situation as year-end approaches.