January 5, 2021

Breaking down the Relief Bill

By Alynne Zielinski, MBA, CFP®, CDFA®

Breaking down the Relief Bill


The IRS will send $600 checks to those who qualify and any children they have under the age of 17. For every $100 of AGI exceeding the threshold, $5 of recovery rebate will be phased out.

Filing Status 2019 AGI Threshold
Single $75,000
Married Filing Jointly $150,000
Head of Household $112,500


Bob and Judy have 3 children ages 5, 7, & 9. The AGI on their 2019 tax return was $200,000. Bob and Judy’s maximum stimulus check is $3,000. ($600 each for Bob, Judy, Child 1, Child 2 and Child 3). Since Bob and Judy’s 2019 AGI was $50,000 greater than the $150,000 threshold, their benefit will be reduced by $2,500, resulting in a $500 check.

$200,000 – $150,000 = $50,000

$50,000 ÷ $100 × $5 = $2,500

Total Benefit for Bob & Judy = $3,000 – $ 2,500 = $500


There is a $300 per week increase in unemployment benefits checks until March 14, 2021. Unemployment benefits for gig workers, freelancers, independent contractors, self-employed individuals and certain others is extended through April 5, 2021, once regular state benefits are exhausted.


To qualify for PPP2, a business must have already received and spent PPP1. Although the application period for PPP closed on August 8, 2020, PPP2 is reopening the application period for small businesses that did not take or use a loan under PPP1. This will allow them to apply for and receive funds under PPP2. Businesses with fewer than 300 employees (except those that provide accommodation & food services, which retain their existing exception) and that have seen a greater than 25% decline in revenue in any quarter of 2020 over the same quarter in 2019 can apply. Loans are limited to $2MM.

When PPP1 was first introduced the IRS stated that expenses paid with tax-free funds such as PPP could not be claimed as deductions on the borrower’s tax return. This meant small businesses looking to offset income with expenses that would normally be deductible could end up with a higher tax bill. PPP2 authorizes deductions of expenses paid with both PPP1 and PPP2 funds on the borrower’s tax return.

Four new categories of expenses for which PPP funds can be used have been added:

  1. Covered Operations Expenditures – “for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses”
  2. Covered Property Damage Costs – “related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation”
  3. Covered Supplier Costs
  4. Covered Worker Protection Expenditures – Expense incurred to comply “with requirements established or guidance issued by the Department of Health and Human Services, the Centers for Disease Control, or the Occupational Safety and Health Administration, or any equivalent requirements established or guidance issued by a State or local government, during the period beginning on March 1, 2020 and ending the date on which the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the Coronavirus Disease 2019 (COVID–19) expires related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19”


Eviction protection is extended until January 31, 2021. The money will be sent to individual states, and tenants need to apply for aid through state or local relief agencies. You can visit the government website for your city or county to see what is available for you. To be eligible for rental assistance the household income must be below 80% of the area’s median income and someone in the household must be able to prove ONE of the following:

  • Qualification for unemployment benefits.
  • A loss of income.
  • Financial hardship due to COVID-19.
  • At risk of losing the home.


No extension or extra relief was included in the bill. Borrowers should expect interest to start accruing and payments to resume on January 31, 2021.


  • The deadline to pay deferred payroll taxes is extended to December 31, 2021.
  • Medical expense deductions are restored to 7.5% of AGI for all taxpayers.
  • 2020 is the last year the Tuition and Related expenses above-the-line deduction can be claimed, as it will be replaced by a Lifetime Learning Credit with a higher phase-out range.

    Filing Status AGI Phase-out Range
    Single $80,000 – $90,000
    Married Filing Jointly $160,000 – $180,000
  • The ability to deduct up to 100% of AGI on an all-cash contribution to a qualifying charity has been extended through the end of 2021.

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