We hope you are continuing to stay safe and healthy. Below are the updates related to the PPP loan and its forgiveness and a couple tax items on the upcoming election.
PPP Loan Update
On August 8, 2020 the SBA stopped accepting applications for the PPP loan. We do not know at this time if the program will be extended with a second lending period. Legislation is pending in Congress. There is still significant guidance expected in the coming weeks which is being worked on by the US Treasury and Congress. To ensure that you'll receive the maximum amount of loan forgiveness, we believe it is prudent to wait on completing your forgiveness application until the additional guidance is provided. If you do want to apply for forgiveness sooner, here is information on how to apply:
- Loan Forgiveness Application Due Date:
If a borrower is requesting loan forgiveness, one must apply within ten months of the completion of the Covered Period. As a reminder the Covered Period is defined as follows:
The Covered Period is either (1) the 24-week (168-day) period beginning on the PPP loan disbursement date, or (2) if the borrower received its PPP loan before June 5, 2020, the borrower may elect to use an eight-week (56-day) Covered Period.
- Loan Forgiveness Applications:
The SBA has issued three different forgiveness applications to be completed with your lender. The forms are as follows:
Please discuss with your MGGGY LLP accountant or your PPP lender the applicable application based on the facts and circumstances of your loan.
Trump/Biden Tax Plan Comparison
The following compares the tax proposals of Joe Biden and Donald Trump. These are not final but are the platforms both candidates have proposed:
1. Individual Tax Rates
The current law has seven tax brackets ranging from 10%-37%. Trump would stick with these brackets, while Biden would like to increase the maximum tax rate to 39.6% for all with taxable income over $400,000.
2. Capital Gain Rates and Investments
The current law enacts a top rate on capital gain investments at 20% plus the net investment income tax of 3.8%. Trump would like to reduce the maximum Capital Gain rate to 15%. Biden would like to keep the rates as is except for taxpayers whose taxable income is over 1 million dollars.
3. Itemized Deductions
The current law allows taxpayers to take eligible deduction and credits against their income tax liability. The itemized deduction for state and local taxes (SALT) is capped at $10,000. Trump would keep the law the same. Biden has proposed capping itemized deductions at 28% but his proposal eliminates the SALT cap, meaning state taxes and property taxes would be deductible.
4. Corporate Tax Rate
The current law has a corporate tax rate of 21%. Trump would keep the rate the same. Biden proposes increasing the rate to 28%.
5. Estate Tax
The current estate and gift taxation exemption amount is $11.58 million per individual, allowing a married couple to exclude a total of $23.16 million in assets in 2020. The current law would sunset in 2025. Biden proposes to reduce the estate and gift tax exemption to the prior levels before the tax cut and jobs act was passed. Therefore the estate tax could be reduced to $5 million per individual or $10 million per married couple.
With all the uncertainty in the next couple of months, now is a great time to reach out and discuss planning opportunities. See the following link for our 2020-2021 tax planning guide: https://www.webtaxguide.net/MGGCPA/