2021 Tax Law Changes

2021 Tax Law Changes

It’s been a busy few months with multiple tax law changes coming late in the tax filing season.  At the Federal level two important changes, among many changes, are the expanded Employee Retention Credit (ERC) for businesses and the expanded Child Tax Credit (CTC) for individual taxpayers.

On December 27, 2020 the President signed into law the Consolidated Appropriations Act, 2021 (CAA) which contains The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTRA).  The TCDTRA makes more than 60 changes in the existing federal tax law provisions of the IRS.  In addition to the TCDTRA, the CAA includes other federal tax law changes related to COVID-19 pandemic relief (COVIDTRA).

One important change for businesses is the increased refundable payroll tax credit (ERC) from a maximum of $5,000 per employee to $14,000 per employee.  For more information, click here: https://www.irs.gov/newsroom/new-law-extends-covid-tax-credit-for-employers-who-keep-workers-on-payroll.

On March 11, 2021 the President signed into law the American Rescue Plan Act of 2021 (ARPA) which includes tax law provisions to provide relief the individuals and businesses impacted by the COVID-19 pandemic.

One important change for individuals is the expansion of the Child Tax Credit (CTC).  The new credit is up to $3,000 per qualifying child between the ages of 6 and 17 and $3,600 for a qualifying child under the age of 6.  Eligible tax payers will receive ADVANCE payments of up to 50 % of the credit in monthly installments beginning in July 2021 and ending in December 2021.  For more information, click here:  https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

On the State level, on June 1, 2021 Governor Hogan signed into law SB 787, Sales of Digital Products and Digital Codes, which contains provisions related to the new pass-through entity (PTE) election to pay and deduct state taxes at the entity level.  The passage into law allows the Maryland Comptroller to finalize Form 511 which is required by our pass-through entities who make the election.  This new election generally ameliorates the impact of the $10,000 SALT cap on the individual tax return.  

More information regarding the CAA which contains The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the COVID-19 pandemic relief