Stimulus Package Relief for Small Businesses

Learn about the provisions included in the new stimulus bill that are designed to help small businesses.

The new stimulus bill (Consolidated Appropriations Act of 2021), passed at the end of 2020, contains many provisions designed to help small businesses still struggling in the wake of the COVID-19 pandemic. Here are some of the most important ones for small business owners. For more information, see Second Stimulus Package's Relief for Small Businesses.

100% Deduction for Business Meals

For 2021 and 2022 only, 100% of the cost of meals and beverages business owners have with customers, clients, employees, and other business associates in restaurants, bars, and similar establishments are deductible as a business expense. For decades the tax law has limited this deduction to 50% of the total cost of the meal. This is intended to help restaurants and bars which have been especially hard hit by the pandemic.

Employee Retention Tax Credit Expanded

The stimulus bill expands the Employee Retention Tax Credit established by the Coronavirus Aid Relief and Economic Security Act (CARES Act) for businesses that maintain their employee payrolls during the pandemic. The credit is available to any business:

  • whose operations were fully or partly suspended during any calendar quarter in 2020 due to a government COVID-19 related order, or
  • that experienced a 50% or greater decline in gross receipts during any 2020 calendar quarter--the decline need not have been due to the pandemic.

The stimulus bill increases the tax credit to a maximum of $14,000 per employee. Originally, the credit was capped at $5,000 per employee. It also extends the credit to apply to compensation paid to a covered employee through June 30, 2021.The bill also allows businesses to use the Employee Retention Tax Credit at the same time as a Paycheck Protection Program

(PPP) loan.

Extension of Temporary Tax Provisions

The stimulus bill also extends or makes permanent 40 tax provisions scheduled to expire on December 31, 2020. Many of these benefit businesses, including:

  • lower excise tax rates for beer, wine, and distilled spirits
  • employer tax credit for paid family leave
  • exclusion of certain employer payments of student loans
  • Work Opportunity Tax Credit
  • New Markets Tax Credit, and
  • the deduction for energy improvements to commercial buildings.