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HEROES Act: Tax Changes for Individuals & Small Businesses

The newly proposed HEROES Act provides numerous new #tax changes to benefit both individuals and small businesses.

On May 12, House Democrats unveiled their new $3 trillion Health and Economic Recovery Omnibus Emergency Solutions Act, otherwise known as the HEROES Act. The new bill provides economic relief for states, local governments, frontline healthcare workers, and small business owners, as well as individuals and families. It also includes numerous new tax provisions that would not only expand upon the previous coronavirus relief package, but also remedies current restrictions on the Paycheck Protection Program. Here’s a quick glance at each of the proposed new tax changes.

HEROES Act Tax Changes

Expanded Payroll Tax Credit

Under the new bill, employers could receive a payroll tax credit up to $12,000 per employee per quarter, giving business owners an additional $5,000 per employee through the remainder of 2020.

Paycheck Protection Program Tax Credit

The current Paycheck Protection Program (PPP) does not allow small business owners to deduct the payroll, rent or other operating costs covered by PPP on their tax returns. The HEROES Act would remedy that roadblock, which could potentially provide billions of dollars in tax relief.  

No Cap on SALT

The current tax law imposes a $10,000 cap on tax breaks. Democrats have proposed removing the cap on state and local tax (SALT) in the new bill.

Increased Child Tax Credit

Families with children currently receive a $2,000 child tax credit, but the HEROES Act would increase that to $3,600 (5 and younger) or $3,000 (between 6 and 17 years of age) per child. The money, however, would be given immediately instead of being disbursed next tax season.

In addition, the new legislation would partially repeal the current tax break, often referred to as the “millionaire tax break” by House Democrats, which allows business owners to use their losses to offset profits to receive an IRS refund.

Other HEROES Act Key Provisions

The HEROES Act sets aside nearly $1 trillion in aid for state and local governments. There are also numerous economic relief provisions for individuals, including:

Additional Stimulus Checks

Under the HEROES Act, individuals would receive an additional $1,200, as well as another $1,200 per dependent child. The household maximum would be $6,000. Unlike the CARES Act, which excluded college students, the new bill increases the dependent age from 17 to 24. Undocumented immigrants would also be included as eligible recipients.

Extension of Federal Unemployment Insurance

Those who have lost their job due to COVID-19 could receive an additional $600 per week in unemployment for the remainder of 2020.

Student Loan Forgiveness

Some student loan borrowers could essentially receive student loan forgiveness if the bill passes. There is a provision to provide up to $10,000 in student loan payments per individual through September 2021.

Hazardous Duty Pay

House Democrats have also requested $200 billion to provide hazardous duty pay to essential workers who are at risk of exposure to COVID-19 while on the job.

Although the chances of the bill passing as written are slim to none, it does set the stage for negotiations. A new stimulus package deal, however, will likely not happen until next month or later this summer.