Thanks to legislation recently passed by the Virginia General Assembly, businesses in the state who received a loan through the Paycheck Protection Program or Rebuild Virginia initiative will be eligible to deduct up to $100,000 of business expenses related to those loans on their state tax returns. This brings Virginia closer to being in conformity with the IRS guidelines, which do not have a dollar limit on the deductions related to those loans.
This is great news for business owners in Virginia who are struggling to recover from the pandemic. Here are the main points of the recent legislation:
- Excludes PPP loan forgiveness amount from income
- Provides up to $100,000 in deductions for business expenses paid with PPP money
- Provides same tax treatment for Rebuild Virginia grants
- Provides over 80% of loan recipients FULL deductibility
To read more about the details, click here.
Reminder: Early withdrawals from retirement accounts made in 2019 could be both penalty-free and tax free.
In last month's newsletter, we mentioned that thanks to a provision of the CARES act, people who were impacted negatively by the pandemic could make an early withdrawal from a retirement account without paying the usual penalty for doing so. If you did so, you can elect to either pay the taxes on that income this year or spread it out over three years. However, depending on the type of account the money was withdrawn from and the length of time the account has been open, you may actually not have to pay any taxes on that money.
In any case, be sure to let us know if you made an early withdrawal from a retirement account last year when you send in your tax organizer, and specify what type of account it was (i.e., Roth IRA, Traditional IRA, etc.) so we can be sure that you don't pay any unnecessary taxes.