COVID Stimulus 2.0- Relief for Tens of Millions of Americans

December 29, 2020

The U.S. stock markets hit new records Monday based on President Trump signing a massive $2.3 trillion spending bill:  $900 billion for virus relief and $1.4 trillion funding of the federal government through September 30, 2021.  The markets love certainty and stimulus. They got both.

Economists have been concerned that, without relief, the surging coronavirus pandemic would continue to disrupt business and social activity and perhaps lead to a double-dip recession in early 2021.  Many of the new aid provisions, such as extended jobless benefits, will expire in the first quarter of next year.  So, the wrangling in Washington over COVID Stimulus 3.0 will likely start again after President-Elect Joe Biden takes office on January 20th.

Let’s take a look at some of the elements of the relief package, many of which are similar to the $2.2 trillion CARES Act signed into law on March 27, 2020:

Direct Stimulus Checks of $600 per qualified individual.  Qualified individuals are a taxpayer (or, in the case of a joint return, taxpayers) as well as children under the age of 17.  Single taxpayers with Adjusted Gross Income (AGI) of $75,000 or less will get the full amount. Joint filers with AGI below $150,000 will receive the full amount.  Checks will be reduced as income goes above those thresholds.  2019 income tax returns will be used for the calculation. However, after the 2020 income tax returns are filed, households will, in the event the AGI in 2020 is less than the AGI in 2019, potentially receive an additional check.  There will be no “clawback” for higher income in 2020.  These stimulus checks should be distributed in the first few weeks of 2021

PPP2- Paycheck Protection Program returns and is enhanced.  PPP2 will provide additional loans to qualifying companies who received PPP(1) loans as well as others needing loans.  PPP2 limits the loans to $2 million (PPP1 was $10 million) and focuses on smaller businesses (max of 300 employees vs. 500 before), particularly accommodation and food services.  PPP2 will generally require that loan applicants be able to demonstrate a drop in revenue of 25% in any quarter in 2020 vs. 2019.  It will allow proceeds to be used for more than payroll and occupancy costs including operations expenses, property damage costs, supplier costs, and worker protection expenditures.

In addition, Congress clarified that expenses paid with forgiven PPP loans funds are deductible.  The CARES act provided that the forgiveness of a PPP loan was not taxable. However, the IRS effectively nullified that by adopting the position that expenses paid with tax-free money were not deductible. Congress has now specifically stated that 1)no amount shall be included in the gross income of the eligible recipient by reason of forgiveness of the loan and 2) no deduction shall be denied, no tax attribute shall be reduced and no basis increase denied, by reason of the exclusion from gross income provided in 1).

Expansion of the Employee Retention Credit.  The Employee Retention Credit is a refundable payroll tax credit to certain businesses whose quarterly revenues have declined by 20% or more.  Credits can be up to $7,000 per employee per quarter.  The comparison in quarterly revenue decline can be made with the prior year or the prior quarter.   

Extended Unemployment Benefits.  Individuals would receive an additional $300 per week on top of their “regular” state-determined unemployment compensation benefit for 11 weeks.  This includes individuals not normally eligible to receive such benefits, including self-employed individuals.  

Personal Income Tax changes:

  • Medical expenses will be deductible to the extent they exceed 7.5% of AGI
  • Revision and expansion of the Lifetime Learning Credit
  • Charitable contributions of $300 person ($600 for couple) deductible in 2021 in addition to the standard deduction
  • Certain business meals in restaurants are deductible 100% (not sure that’s a big one this year)
  • Carryforward relief to 2021 for Flexible Spending Accounts not used at end of year


  • $82 billion for schools
  • $10 billion for child care
  • $25 billion in rental assistance, including a moratorium on evictions
  • $30 billion for distribution of the vaccine and $22 billion for testing and tracing


We’re very pleased that this relief has come for tens of millions of Americans.  As we all celebrate the ‘ringing in’ of The New Year of 2021, we are hopeful many U.S. families and businesses, not nearly as fortunate as us, can breathe a small sigh of relief that the COVID Stimulus 2.0 will hopefully bring to them.

Happy New Year!!

Detterbeck Wealth Management is a fee-only financial planning / wealth management company with offices located in Palatine, IL (Chicago area) and Charleston, SC areas serving clients locally and across the country. To contact us about setting up an appointment, please see our contact us page