U.S. Travel Tax Credit Would Cover Vacation Expenses up to $4,000
The travel industry took a huge hit during the COVID-19 pandemic. With people social distancing and complying with stay-at-home orders, traveling all but disappeared in 2020. Also, since many people lost their jobs, they didn't have money to travel.
In May 2020, President Trump proposed a tax credit for domestic travel that could have helped the travel industry. The tax credit would have encouraged more people to travel and it would have allowed some people to go back to work.
What is the 2020 travel tax credit and how does it work?
During the summer of 2020, President Trump proposed the idea of a travel tax credit. During a roundtable discussion with restaurant executives, he said, "Create an ‘Explore America’ — that’s ‘Explore,’ right? Explore America tax credit that Americans can use for domestic travel, including visits to restaurants. That’s a big deal."
The next month, an article in The U.S. Sun stated that the travel credit would be up to $4,000 and could be used until the end of 2021. The credit was meant to cover the cost of hotel stays, visiting restaurants, theme parks, and other travel-based expenses for domestic travel.
Travel tax credit's intent
According to Bankrate, the tax credit was meant to cover up to 50 percent of any travel expenses over $50 within the U.S. to help keep money in the travel industry. The industry has been struggling amid the coronavirus pandemic. When it's time to file taxes, people would be able to claim the credit and have at least some of the costs covered.
In a May 2020 press release, the U.S. Travel Association said, "Travel supported jobs for 1 in every 10 Americans before the pandemic, and measures to incentivize travel will not only give people a renewed appreciation for this great country in which we live, but they are an efficient and effective way to ignite a recovery and restore jobs in every corner of the nation."
Currently, the travel industry is losing a lot of money. According to Forbes, the industry brought in $2.6 trillion and 15.8 million American jobs. As of June 2020, 40 percent of jobs lost in the country through April were in the travel industry.
How long the travel tax credit would be good for
Initially, the tax credit would have been good until the end of 2021, but since it didn't get passed in 2020, the deadline might change if something like it gets approved in 2021.
Certain stocks would benefit from the travel tax credit
Any stocks in the travel industry could benefit from the tax credit, but other related stocks may also see a boost in price. For example, fuel companies could benefit from the tax credit including a company like Albemarle, which produces lithium used in many electric car batteries.
Retail stocks would probably benefit from the tax credit because people would need to buy things before they travel. Also, many people like to shop while they're traveling. Institutions developing coronavirus vaccines like AstraZeneca could benefit from increased travel and people's desire to be safe.
The fashion industry also took a hit during the coronavirus pandemic. Many people chose to focus on buying things they could do indoors. A travel credit could change that because people would have an excuse to buy new clothes.