4 Coronavirus Tax Relief to Businesses under CARES Act
Stimulus check is not the only relief given to taxpayers, but CARES ACT takes care of business suffering on account of Coronavirus pandemic. There are four distinct tax reliefs to businesses that will surely provide badly needed monetary help during these trying times.
1.Five Years Carryback of Business Losses
The Tax Cuts and Jobs Act revised the law to eliminate the carryback of net operating loss (NOL) arising after 2017 and provided that generally, NOLs were to be carried forward only. TCJA also removed the 20-year carryforward limitation but allowed offsetting of NOL upto 80% of the carryforward year’s taxable income.Now, the recently enacted Coronavirus Aid, Relief, and Economic Security Act has restored NOL carrybacks for losses incurred in years 2018, 2019 and 2020 . The relief amendment provides that NOLs can be carried back five years, and the loss is not subject to the 80% limitation.So, business owners should do tax filing preparation for any losses incurred in 2020 as a result of business restrictions or shutdown as a result of the crisis.
2.Retroactive 100% Bonus Depreciation
The next relief is applicable to “qualified improvement property” of business . So what is “qualified improvement property” ? Well it refers to leasehold, restaurant and retail improvements propertie.
The 100% bonus depreciation deduction only applies to business property with a recovery period of 20 years or less. Now , TCJA amended the recovery (depreciation) period for qualified improvement property to be 39 years. Thus , qualified improvement property owners could not get 100% bonus depreciation
The CARES Act now provides that the qualified improvement property will bea 15-year recovery property, thus qualifying for 100% bonus depreciation or, if preferred, a 15-year depreciable life.
3.Limitation on Losses of Taxpayers Other Than corporations Relaxed
The 2018 tax reform imposed business loss limitations on taxpayers other than corporations. But now , as part of Covid-19 pandemic relief , the CARES Act has made the loss limitation inoperable for businesses (including farming) through December 2020.
This amendment by CARES Act is retrospective to 2018 and allows taxpayers who were affected by the limitation to amend their 2018 returns.
4.Limitation on Deductible Business Interest Increased to 50%
Now , if you have business with incomes of $25 million ($26 million in 2019) or more , you can deduction business interest deduction of up to 50% of their adjusted taxable income. Because income is expected to be lower in 2020, a special provision allows the 2019 adjusted taxable income to be used in figuring the 2020 interest deduction limit.
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