Author Topic: Next round of coronavirus stimulus  (Read 1516 times)

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5330
  • Age: 35
  • Location: Seattle, WA
    • My blog
Next round of coronavirus stimulus
« on: May 12, 2020, 11:36:15 PM »
The House Democrats released their "HEROES Act" proposal for the next round of coronavirus stimulus today. Being a giant nerd, I skimmed over the tax-related provisions. Some interesting bits:

Payments to individuals:
* The $500 extra payment on the first round of checks would be given for dependents of any age, not just kids under 17. (page 150)
* Another round of stimulus payments would go out. Details look pretty similar to the last round, except dependents would get $1,200 this time, limit 3 dependents. (page 160)
* Stimulus checks would no longer be able to bear the signature of the president, vice president, or cabinet officials. (page 186)

Earned income credit:
* More people with no kids would get this credit, and they would get more money from it. 2020 only. (page 188)
* The limit on investment income to qualify for this credit would be eliminated indefinitely. This could be a big deal for folks in this FIRE community if it comes to pass. (page 194)
* People whose earned income changed from 2019 to 2020 would be able to elect to use their 2019 earned income to compute this credit. (page 204)

Child tax credit:
* The $1,400 limit on the amount that can be treated as a refundable tax credit would be eliminated for 2020. (page 207)
* Amount for 2020 would be increased to $3,000, or $3,600 for kids under 6. (page 208)
* 17-year-olds would qualify for the credit. This would be an indefinite change. (page 208)
* The government would start sending out monthly advance payments of the child tax credit for the rest of this year. (page 208)

Child/dependent care:
* For 2020, the amount of expenses per dependent that can be claimed for the child/dependent care tax credit would double to $6,000, the credit would be a higher percentage of these expenses for most taxpayers, and the credit would be refundable. (page 216)
* For 2020, dependent care FSAs would have a $10,500 limit. (page 217)

FSAs:
* The limit on year-to-year carryovers for medical FSAs would increase to $2,750 for 2020->2021 carryovers only. (page 218)
* Several other changes allowing larger FSA grace periods for this year, allowing people to increase their contribution mid-year one time only, and more.

Deductions:
* The $10k cap on deductions for state and local taxes would be eliminated for 2020 and 2021 (page 224)
* The maximum deduction teachers can take for supplies would increase for $500, indefinitely. (page 225)
* First responders would be able to take a $500 above-the-line deduction for uniforms or professional development classes, and for 2020 this would also apply to "COVID-19 front line employees." (page 226)

Employee retention credit:
* There would be a pretty massive expansion to the employee retention credit passed in the previous CARES Act.
* The credit would cover 80% of qualifying wages (up from 50%). (page 236)
* The maximum amount of qualifying wages per employee would increase to $15k quarterly/$45k all year, (up from $10k all year). (page 236)
* The threshold for qualifying as a small employer (and therefore getting a credit for employees who are still working during the pandemic) would increase to 1,500 employees. (page 237)
* Employers who are not shut down and experience a 10-49% year-over-year drop in quarterly revenue would be eligible for a partial credit. (page 238)
* Certain state/local/tribal governments would be eligible for this credit. (page 244)

Other business tax credits:
* A new 30-50% tax credit would be available to offset part of the first $5,000 of qualified pandemic relief payments given to employees. (page 228)
* A new credit, with similar qualification criteria as the employee retention credit, would cover 50% of employer rent/mortgage/utility bills during qualifying quarters. The amount of qualifying expenses per quarter would be capped at $50k (less for certain employers with low payroll expenses and/or revenue). (page 245)
* A new refundable "business interruption credit" would give money to certain self-employed individuals who saw their business income go down by at least 10% in 2020. (page 258)
* The new credits for paid sick leave and family leave would be extended through 2021, and would be expanded some to cover more people. (page 267)

Required minimum distributions:
* RMDs from 2019 and 2020 would be cancelled. (page 658)
* RMDs that have already been taken for those years can be repaid as if they were a rollover, exempt from the normal 60-day requirement. (page 659)

This bill is an early proposal from one party and is sure to go through many changes as part of Congress's sausage factory. Even so, it's interesting to see some of what's in their wish list. I wouldn't be surprised to see much of it make it through to law in some form as this pandemic continues to drag on.

Michael in ABQ

  • Handlebar Stache
  • *****
  • Posts: 1016
    • Military Saints
Re: Next round of coronavirus stimulus
« Reply #1 on: May 13, 2020, 03:52:45 AM »
Well if many of those changes go through I would personally benefit quite a bit with 6 kids. Another $5,400 stimulus check, and potentially $19,200 in child tax credits, up from $12,000 last year. Since most of my income this year will be tax free while deployed, I will qualify for the EITC so that could add several thousand more. I could potentially end up getting a tax refund of $20k +/- after making $120k for the year (albeit with most of that tax free or non-taxable allowances).

On the other hand that's another $3 trillion in debt for the whole package as proposed. A trillion here, a trillion there, pretty soon you're talking about real money.


I am deeply opposed to the potential trillion dollar bailout of state and local governments. They might as well just nationalize every government pension plan. Effectively we will rescue numerous governments from years of overpromising and underfunding pensions. We will encourage governments to continue spending recklessly knowing that eventually they will get bailed out. It's the same moral hazard we saw with the big banks and numerous other industries during the last recession.

jpdx

  • Pencil Stache
  • ****
  • Posts: 517
Re: Next round of coronavirus stimulus
« Reply #2 on: May 17, 2020, 01:43:23 AM »
The changes to the EITC and child care tax credit (fully refundable!) would be a big deal, indeed. For EITC, are you saying that the dividend and interest income test would be eliminated?

Thank you for sharing this writeup.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5330
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Next round of coronavirus stimulus
« Reply #3 on: May 17, 2020, 12:39:30 PM »
The changes to the EITC and child care tax credit (fully refundable!) would be a big deal, indeed. For EITC, are you saying that the dividend and interest income test would be eliminated?

Yes. From the bill that passed the House on Friday:
Quote
ELIMINATION OF DISQUALIFIED INVESTMENT INCOME TEST
Sec. 20124.
(a) In General.—Section 32 of the Internal Revenue Code of 1986 is amended by striking subsection (i).
(b) Conforming Amendments.—
  (1) Section 32(j)(1) of such Code is amended by striking “subsections (b)(2) and (i)(1)” and inserting “subsection (b)(2)”.
  (2) Section 32(j)(1)(B)(i) of such Code is amended by striking “subsections (b)(2)(A) and (i)(1)” and inserting “subsection (b)(2)(A)”.
  (3) Section 32(j)(2) of such Code is amended—
    (A) by striking subparagraph (B), and
    (B) by striking “ROUNDING.—” and all that follows through “If any dollar amount” and inserting the following: “ROUNDING.—If any dollar amount”.
(c) Effective Date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Section 32 of the Internal Revenue Code describes the Earned Income Credit. Subsection (i) disallows the credit for people with investment income above $2,000 (adjusted for inflation). This would be deleted by paragraph (a) of the quoted text above. The other modifications described in paragraph (b) are just deleting references to the deleted subsection (i) from the inflation adjustment rules. Unlike the other changes to the EIC proposed in the HEROES Act, this change would apply for all years beyond 2020 until Congress changes the law again.

EricEng

  • Bristles
  • ***
  • Posts: 379
  • Location: CO
Re: Next round of coronavirus stimulus
« Reply #4 on: May 20, 2020, 11:21:13 AM »
Quote
Child tax credit:
* The $1,400 limit on the amount that can be treated as a refundable tax credit would be eliminated for 2020. (page 207)
* Amount for 2020 would be increased to $3,000, or $3,600 for kids under 6. (page 208)
* 17-year-olds would qualify for the credit. This would be an indefinite change. (page 208)
* The government would start sending out monthly advance payments of the child tax credit for the rest of this year. (page 208)
Wow, just wow.  This would be crazy generous. Curious if anyone of it will survive the Senate.

stoaX

  • Pencil Stache
  • ****
  • Posts: 582
  • Location: South Carolina
  • 'tis nothing good nor bad but thinking makes it so
Re: Next round of coronavirus stimulus
« Reply #5 on: May 20, 2020, 11:49:09 AM »
Thanks for the summary - so much better learning about it the way you presented it than on some advertising laden, annoying news site.

ketchup

  • Magnum Stache
  • ******
  • Posts: 4248
  • Age: 29
Re: Next round of coronavirus stimulus
« Reply #6 on: May 20, 2020, 01:11:45 PM »
The bill would also keep the expanded +$600/week unemployment expansion alive through January (current sunsets at the end of July).  That would be a pretty big deal for people on UI.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5330
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Next round of coronavirus stimulus
« Reply #7 on: July 28, 2020, 12:57:48 AM »
The Republicans finally got around to unveiling their proposal today.

Highlights:
* Unemployment insurance would pay $200/week in addition to base pre-pandemic amounts through early October, then would pay 70% of wages for the remainder of the year. Democrats want to keep the $600/week bonus that was in place through July.
* Another stimulus payment would be given to Americans, with basically the same eligibility requirements and amounts as the first one ($1,200 for adults and $500 for dependents). The House bill would pay $1,200 for dependents instead of just $500.
* The employee retention credit would pay 65% of qualifying wages (up from 50%), based on a maximum of $10,000 of wages per employee per quarter (up from $10,000 per employee for the whole year). The House bill would pay 80% of the first $15,000 per employee per quarter.
* There would be a new "safe and healthy workplace" tax credit paying employers 50% of certain COVID-related expenses, including PPE, cleaning, and reconfiguration of physical spaces. The credit would be limited to $1,000 per employee for employers under 500 employees, and less for larger employers. Self-employed individuals would also be eligible to claim this credit, up to $500.
* Through 2025, states wouldn't be able to tax non-residents for wage income earned in that state unless the person worked there for more than 30 days during the year. This would be a boon for people who do business travel and have states claiming they owe tax when they were there for just a few days. Professional athletes, entertainers, film industry workers on state-subsidized projects, and certain other public speaking professionals would be excluded from this.

Those look like the main items related to individuals and businesses in the Finance Committee's portion of the bill. The bill doesn't include any changes to the child tax credit, earned income credit, or child/dependent care credit that were part of the House bill. For the topics included in both bills (unemployment insurance, stimulus checks, employee retention credit) we can probably expect some compromise in between the Republican and Democratic Party proposals. We shall have to see!

secondcor521

  • Magnum Stache
  • ******
  • Posts: 2954
  • Age: 51
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: Next round of coronavirus stimulus
« Reply #8 on: July 29, 2020, 11:51:48 PM »
I think there is motivation on both sides to pass another stimulus bill, although there is always opportunity for surprises.

One feature of the Republican proposal which I believe is missing from the summary above is that the credit for dependents is expanded to include all dependents, not just those under 17.  In my case that's a $1,000 difference as I have two offspring of that type on my 2019 return.

la Condessa

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Next round of coronavirus stimulus
« Reply #9 on: July 30, 2020, 09:21:53 AM »
Also the democrats’ bill gives the larger amount for only three dependent children, but the republicans’ bill gives the smaller amount for all dependent children.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5330
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Next round of coronavirus stimulus
« Reply #10 on: July 30, 2020, 10:21:51 AM »
Also the democrats’ bill gives the larger amount for only three dependent children, but the republicans’ bill gives the smaller amount for all dependent children.

Yes, families with eight or more dependents would get a larger stimulus check under the Republican proposal.

The_Big_H

  • Stubble
  • **
  • Posts: 151
Re: Next round of coronavirus stimulus
« Reply #11 on: July 31, 2020, 10:27:30 PM »
Thanks for the summary - so much better learning about it the way you presented it than on some advertising laden, annoying news site.

Second this, very interesting proposals.  Thanks for the info!

ender

  • Walrus Stache
  • *******
  • Posts: 5527
Re: Next round of coronavirus stimulus
« Reply #12 on: August 01, 2020, 06:27:02 AM »
It'll be interesting to see if/when this gets passed too.

The unemployment benefits are a time sensitive thing, so I can see this getting fast tracked stuck in limbo for weeks/months.

Michael in ABQ

  • Handlebar Stache
  • *****
  • Posts: 1016
    • Military Saints
Re: Next round of coronavirus stimulus
« Reply #13 on: August 01, 2020, 07:46:12 AM »
Also the democrats’ bill gives the larger amount for only three dependent children, but the republicans’ bill gives the smaller amount for all dependent children.

Yes, families with eight or more dependents would get a larger stimulus check under the Republican proposal.

I used to have access to a paid demographics service through my previous employer and one of the data points was household size. I believe it maxed out at 7+ (i.e. 5 or more kids). When I ran a national report it was about 2% of households that fell into that category. So with our household of 6 kids we're already pretty far to the end of the bell curve. 8 kids is probably less than 0.1% of households.