Tax Benefits for Businesses Included in the CARES Act

April 2, 2020

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Tired of hearing about the Coronavirus Aid, Relief, and Economic Security (CARES) Act already? That’s understandable. However, it contains a LOT of important information, so humor us one more blog post on the subject. If you’re curious about how the new law benefits individuals and families, we blogged about that here, and if your business is needing cash fast, here’s information on financial support available through the CARES Act.

Additionally, the legislation includes these helpful tax breaks for small businesses.

Refundable payroll tax credits. If your business was shut down due to COVID-19 social distancing requirements or if it experiences a 50% decline in revenue compared to the same time last year, employers are eligible for a 50% refundable payroll tax credit on wages up to $10,000 during the pandemic. Employers who utilize other forms of relief such as disaster or forgivable loans may not be eligible for the credit.

Delayed social security payroll tax payments. Employer-side social security payroll tax payments can be delayed until Jan. 1, 2021 with 50% owed by year-end 2021 and the remaining 50% owed by year-end 2022. This allows businesses to defer roughly 6% of payroll costs until the next year.

Claim retroactive net operating losses to offset taxable income. Businesses may take net operating losses form 2018, 2019, or 2020 and carry them back five years to fully offset their taxable income.

Increased net interest deduction. In order to help increase liquidity for businesses that must take on more debt during the pandemic, the net interest deduction has been increased from 30% of EBITDA to 50%.

If you have questions about how or when these tax breaks can benefit your business, schedule a time to talk with our tax advisors.

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