The following tax changes that were passed as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act can provide additional relief for businesses facing economic hardship as the result of the coronavirus (COVID-19) pandemic:
Charitable Contributions
The CARES Act lifts the adjusted gross income (“AGI”) limit for corporate donors for the tax year 2020. Corporations can now deduct up to 25% of taxable income (increased from 10%). As with donations by individuals, the increased limit only applies to cash donations to public charities. Gifts of publicity traded securities and appreciated property are not eligible for the AGI deduction limit as well as any donation to a donor-advised fund or supporting organization.
The CARES Act also increases limits on charitable contributions of “apparently wholesome food” by businesses, to encourage donations of food to organizations that provide and serve food to those in need. The term “apparently wholesome food” has the meaning given to such term by section 22(b)(2) of the Bill Emerson Good Samaritan Food Donation Act (42 U.S.C. 1791(b)(2)). The threshold is increased from 15% to 25% of taxable income for contributions of food inventory made during the 2020 calendar-year.
Student Loans
This provision of the CARES Act enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.
Temporary Exception from Excise Tax for Alcohol Used to Produce Hand Sanitizer
The provision waives the federal excise tax on any distilled spirits used for or contained in hand sanitizer that is produced and distributed in a manner consistent with guidance issued by the Food and Drug Administration and is effective for calendar year 2020.
Please contact your Tronconi Segarra & Associates tax advisor for more information on this or any tax matter. If you do not have a Tronconi Segarra & Associates tax advisor, please call 716.633.1373 or Contact Us through our website with your question.
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