$250 educator expense deduction applies to PPE

Eligible educators (i.e., kindergarten through grade 12 teachers, instructors, etc.) are allowed a $250 above-the-line deduction for certain otherwise allowable trade or business expenses paid by them. (Code Sec. 62(a)(2)(D)(ii))

New law. COVIDTRA provides that, not later than February 28, 2021, the IRS must, by regulation or other guidance, clarify that personal protective equipment (PPE), disinfectant, and other supplies used for the prevention of the spread of COVID-19 are treated as described in Code Sec. 62(a)(2)(D)(ii). Such regulations or other guidance will apply to expenses paid or incurred after March 12, 2020. (COVIDTRA Sec. 275)

Certain Charitable Contributions Deductible by Non-Itemizers

For 2020, individuals who normally do not itemize deductions may take up to a $300 above-the-line deduction for cash contributions to qualified charitable organizations (deduction limits of $300 also applied to married filers). A 20% penalty applies to tax underpayments attributable to any overstated cash contribution by non-itemizers.

New law. The TCDTR extends the above rule through 2021, allowing individual cash contributions of up to $300, ($600 for married filers) to be deducted above-the-line for cash contributions to qualified charitable organizations

Reduction in Medical Expense Deduction Floor

Under pre-Act law, for tax years beginning before Jan. 1, 2021, individuals could claim an itemized deduction for unreimbursed medical expenses to the extent that such expenses exceeded 7.5% of AGI. 

New law. The Act makes the 7.5% threshold permanent, applicable for tax years beginning after Dec. 31, 2020. (Code Sec. 213(a), as amended by Act Sec. 101)

Treatment of mortgage insurance premiums as qualified residence interest

Under pre-Act law, mortgage insurance premiums paid or accrued before Jan. 1, 2021 by a taxpayer in connection with acquisition indebtedness with respect to the taxpayer's qualified residence were treated as deductible qualified residence interest, subject to a phase-out based on the taxpayer's adjusted gross income (AGI). The amount allowable as a deduction was phased out ratably by 10% for each $1,000 by which the taxpayer's adjusted gross income exceeded $100,000 ($500 and $50,000, respectively, in the case of a married individual filing a separate return). Thus, the deduction wasn't allowed if the taxpayer's AGI exceeded $110,000 ($55,000 in the case of married individual filing a separate return).

New Law. The Act extends this treatment through 2021 for amounts paid or incurred after Dec. 31, 2020. (Code Sec. 163(h)(3)(E)(iv)(I), as amended by Act Sec. 133)