Photo of business owners discussing federal relief for their business.

Quick guide to 2021 federal relief changes for businesses and their employees

Nine months, 5,593 pages, and $2.3 trillion later, the Consolidated Appropriations Act (CAA), 2021 signed into law on December 27, 2020, will bring more economic relief to businesses still battling the pandemic as they work to protect employees and adapt to better serve customers.

It updates the CARES (Coronavirus Aid, Relief, and Economic Security) Act, passed in March 2020, adding nearly $300 billion more for small businesses through the Paycheck Protection Program (PPP), among myriad adjustments to Small Business Administration (SBA) programs and procedures.

One of the main goals of this complex legislation (one of the longest bills in U.S. history) is to simplify access for the millions of business owners who still rely on these programs.

The most substantial changes for businesses—particularly small businesses (use the links below to jump to a particular section):

“The more the federal government can provide relief that’s understandable, easy to administer, and provides clarity, the better for businesses and communities,” says Amy Friedrich, president of U.S. Insurance Solutions at Principal®.

To dive deeper into the CAA, see our detailed rundown of new relief provisions for businesses (PDF).

See how the new law provides relief to individual taxpayers and employees.

Simplified PPP forgiveness, more eligible business expenses

Updated forgiveness period: Businesses may choose a PPP forgiveness period anywhere between eight and 24 weeks.

Simplified forgiveness: For PPP loans of $150,000 and less, the one-page form forthcoming from the SBA will require only:

  • the number of employees retained thanks to the loan,
  • the estimated amount spent on payroll, and
  • the total loan amount.

Graphic of a thumbtack. Tip: Retain employment records for four years and other relevant financial records for three years in case of an SBA audit.

New eligible expenses for all PPP loans:

  • group insurance payments as part of PPP payroll costs (vision, dental, disability, life insurance),
  • supplier costs on existing contracts and purchase orders,
  • perishable goods purchased at any time,
  • personal protective equipment (PPE), and
  • technology expenses (such as cloud computing).

Even more flexibility for businesses most in need: Some small businesses already in bankruptcy may now be eligible for PPP loans.

PPP2: Some businesses can take a ‘second draw’ PPP

While the CAA should help direct relief to businesses that either missed or bypassed last year’s first round of PPP, it also allows struggling businesses to apply through March 31, 2021, for a second loan. This effort is targeted at smaller businesses that have suffered the most economic hardship. Its criteria:

How you qualify:

  • Previous PPP: Must use all your original PPP loan.
  • Employees: Fewer than 300. (First-time PPP borrowers in this round still can have as many as 500 employees.)
  • Finances: Must have suffered a drop of at least 25% in gross receipts in one quarter of 2020 compared to 2019.
  • Age of business: In operation on or before February 15, 2020.
  • Type of business: Nonprofits now are eligible. So are sole proprietors, independent contractors, and the self-employed. Business leagues (chambers of commerce, visitors’ bureaus) with 300 or fewer employees and whose business is no more than 15% lobbying also may apply.

How much you get:

  • Formula: In general, the loan amount is 2.5 times average total monthly payroll (or 3.5 times for food and lodging businesses) over the last 12 months or in 2019—up to $2 million. (Any individual annual salary used in payroll calculation must be capped at $100,000.)
  • What if you returned all or part of a PPP loan in 2020? You can reapply this year for the maximum amount.

EIDL (Economic Injury Disaster Loan) updates

Deadline: EIDL is replenished and extended until Dec. 31, 2021.

Rules: Businesses no longer have to subtract EIDL advances from PPP loan forgiveness, but they still must use EIDL and PPP to cover different expenses.

Grants: An available $10,000 grant (income tax-free) is no longer limited to $1,000 per employee. Twenty billion dollars in grants is reserved for businesses in low-income communities.

Graphic of a thumbtack. Tip: A low-income community is defined by Census tract: The poverty rate for the tract where the business is located must be at least 20%, or its median family income must not be more than 80% of metro or statewide median family income.

Taxes: Employee retention tax credits and more

Deduct meals: The entire cost of a business meal (as long as it’s provided by a restaurant) is now deductible in 2021 and 2022—doubling the current 50% write-off.

PPP loans: Not only are forgiven PPP loans themselves tax-free, but the eligible expenses they pay for also are deductible business expenses—a change from previous guidance.

Employee retention tax credit: Extended through June 30, 2021.

Main parameters:

  • Type of business: Educational (colleges, universities) and medical (hospitals, clinics) institutions are now eligible.
  • Formula: Starting January 1, 2021, the maximum credit for wages is $7,000 per employee per quarter. Qualifying businesses must have suffered a partial or full business shutdown because of a COVID-19 shutdown order, or at least a 20% reduction in business compared to the same quarter in 2019.
    • > 500 employees: Credits apply only to wages paid to employees not working.
    • 500 or fewer employees: Can request advance credit payment. (More federal guidance forthcoming.)
  • PPP compatibility: PPP recipients are eligible if PPP didn’t pay the wages in question.

SBA loan subsidies, limits

Limits: The maximum SBA express loan amount was boosted to $1 million from $350,000—until October 1, 2021. Afterward, the maximum remains somewhat higher, at $500,000.

Subsidies: The CAA also extends the CARES Act provision that the SBA pays the principal, interest, and fees on a loan for six months, starting on the due date of the next payment (or even after the end of a deferral period on a loan).

Most businesses can expect to have these expenses covered for an additional three months (for a total of nine months), while some smaller and harder-hit businesses will receive an additional five months of coverage (for a total of 11 months, capped at $9,000 per month).

Graphic of a thumbtack. Tip: For new SBA loans approved from February 2021 through September 2021, the SBA is required to pay principal and interest for the first six months (capped at $9,000 per month).

‘Save Our Stages,’ education, broadband

The “Save Our Stages” portion of the CAA makes available $15 billion in grants (capped at $10 million apiece in the first round) to struggling performance venues (live music, theater), museums, and zoos to be used for expenses similar to PPP—but not in addition to PPP. Considering the restaurants and other small businesses that benefit from their proximity to major events and attractions, coming out of the pandemic with these venues intact should provide an overall benefit.

Eighty two billion dollars for education ($54 billion of that for K-12 schools) will help with such measures as upgrading ventilation systems to combat the pandemic—work that may be contracted to local small businesses.

Seven billion dollars earmarked for broadband expansion should benefit not only rural residents but telecoms and businesses in small communities.

How new federal relief helps individual taxpayers

Stimulus checks

Taxpayers receive as much as these amounts based on status and adjusted gross income:




Married, filing jointly


Per qualifying child under 17

This tax-free stimulus begins to phase out by 5% for each $100 of adjusted gross income beyond these thresholds:

Head of household$112,000
Married, filing jointly$150,000

Graphic of a thumbtack. Tip: Adjusted gross income is based on 2019 tax returns, but if your income dropped in 2020 you might be able to claim payment based on that.

Unemployment benefits: $300 more per week in unemployment (taxable) is extended to March 14, 2021 (longer in some cases). Many can claim a maximum 50 weeks of benefits, up from 39. And states can now forgive overpayment of benefits.

Retirement savings: Workers in the building and construction industry now can begin phased withdrawal (“in-service distribution”) of retirement savings as early as age 55. The CAA also allows victims of a federally declared disaster (not COVID-19-related) to access more of their retirement savings (if the plan allows) and avoid the early 10% withdrawal penalty under age 59½. They can also spread the taxes over three years, or avoid income tax if it’s repaid in three years.

What's next?

This communication is provided as education only with the understanding that Principal® is not rendering legal, accounting, investment advice, or tax advice. You should consult with appropriate counsel or other professionals on all matters pertaining to legal, tax, investment, or accounting obligations and requirements.

Insurance products and plan administrative services provided through Principal Life Insurance Co. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC and/or independent broker-dealers. Principal Life, and Principal Securities are members of the Principal Financial Group®, Des Moines, Iowa 50392.

Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.