fbpx
2021 Personal and Business Tax Changes - American Trust Escrow
16165
post-template-default,single,single-post,postid-16165,single-format-standard,ajax_fade,page_not_loaded,,qode-title-hidden,qode-theme-ver-13.8,qode-theme-bridge,disabled_footer_top,wpb-js-composer js-comp-ver-5.4.7,vc_responsive
Tax changes

2021 Personal and Business Tax Changes

2020 was certainly an unusual year, and 2020 tax season is no different. This in part because of the COVID-19 tax relief benefits that were extended during the pandemic. From economic stimulus payments to PPP (Paycheck Protection Program) loans, here are some real estate tax tips to assist you in filing your 2020 return.

Perhaps most notable was a change in the normal timeline for filing taxes. This year, individual taxpayers can postpone their federal income tax payments without penalties and interest until May 17, 2021 for the 2020 tax year due. The historical deadline has been April 15, 2021. This extension is regardless of the amount owed, and the postponement opportunity applies to individual taxpayers, including individuals who pay self-employment tax.

For real estate agents operating as independent contractors, sole proprietors or those who are self-employed, PPP loans were a viable way to stay afloat. As a small business owner, in order to have been eligible for PPP, you would have needed to have been in business for at least one day prior to February 15, 2020. 

And because of a change made by the Biden Administration on March 3, 2021, “Schedule C filers” (including independent contractors, sole proprietors, and the self-employed using IRS Form 1040) can opt to use either their net profits or their gross income to determine their payroll costs and calculate their maximum loan amount. It’s important to note that this change is not retroactive, so existing PPP borrowers are not eligible for the difference in their loan amounts with the new guidelines in mind.

Back to taxes. Many PPP borrowers are curious if they will be taxed on expenses that are paid for with forgiven PPP loans, and the short answer is, no. A correction was made in the December 21, 2020 COVID-19 relief bill clarifying Congress’ intention to keep forgiven PPP loans as tax-free, which includes tax deductibility for business expenses paid for by these loans. Additionally, forgiven PPP loan amounts will not count as income for tax purposes.

It’s important to note that funding for PPP loans is still available thanks to the PPP Extension Act that was passed by Congress on March 25, 2021. This extended the deadline to apply for PPP through May 31, 2021.

Your best course of action is to work with a professional licensed CPA to maximize your deductions, especially considering how many items real estate agents can typically deduct. There are many tax-related items that are specific to the real estate industry, like mileage, classification of employees, how you expense gifts, and more. Look for a tax professional who is experienced in working with real estate agents and can assist you with the nuances that are specific to the 2020 tax season.

If you have escrow questions or would like to learn more about our services, please reach out. We are here to help, and would love the opportunity to support you and your escrow needs.