The CARES (Coronavirus Aid Relief and Economic Security) Act was recently signed into law to help provide financial stability and relief for individuals and businesses affected by COVID-19. While the bill is very broad and addresses a number of areas and industries, and many of the specific details will still need to be analyzed, we believe the following are important to highlight for individuals and their families.
Cash Payments and Unemployment Assistance
- 2020 Stimulus Checks: U.S. residents with adjusted gross income up to $75,000 ($150,000 joint filers) are eligible for a $1,200 ($2,400) payment, as well as an additional $500 per child (under age 17).
- There are no minimum income requirements for the payment. Individuals with little or no income are generally eligible provided they are not a dependent of another taxpayer and have a work-eligible Social Security number.
- This amount is reduced by $5 for every $100 over the income limit above, so it would be fully phased out for those with incomes over $99,000 (single) and $198,000 (joint filers) with no children.
- It is important to think about what stimulus checks can mean for you and your goals. We've outlined our recommendations here.
- Increased Unemployment Assistance: Provides an additional $600/week payment to each recipient of unemployment insurance through July 31, 2020.
- Provides an additional 13 weeks of unemployment benefits through Dec. 31, 2020, for those who remain unemployed after state unemployment benefits are no longer available.
- Delay in Tax-filing Requirements: Individuals now have until July 15, 2020, to file their 2019 tax returns instead of April 15.
- The Treasury Department has also postponed the deadline for making IRA contributions until July 15.
As we navigate through this challenging environment, we want to make sure you know about several provisions within the CARES Act that you may want to consider for your IRAs and employer retirement plans, including:
- Early withdrawal changes
- Increase of retirement plan loan limit
- Required minimum distributions (RMDs)
Enhanced Tax Benefits for Charitable Gifts
- $300 Deduction of Cash Contributions: Ability for an above-the-line deduction of up to $300 of cash contributions to charities, regardless of whether the individual itemizes deductions.
- Changes to Limits on Charitable Contributions:
- Individuals: For those who itemize their deductions for charitable giving, the 60% of adjusted gross income limit for cash gifts is suspended for 2020.
- Corporations: The 10% limit on charitable contributions is increased to 25% of taxable income.
Whether you are a homeowner or a renter, the CARES Act may provide some relief for your situation. Student loan payments have also been suspended through Sept. 30, 2020. We created some helpful information about these provisions, as well as recommendations for you to consider.
- Loan Payment Suspension: Suspends payments automatically for federally held student loans through Sept. 30, 2020, with no interest accruing or penalties during the period of suspension.
- Additional Provisions: Contains a variety of other emergency-relief provisions related to education, and specifically the impact of many students being sent home mid-semester. For example, it allows universities to make payments to students who were unable to complete work-study programs.
- Small-Business Loans: Many small businesses are now eligible for disaster relief loans from the Small Business Administration. Additionally, the CARES Act provides conditions for when loan payments may be deferred and loan amounts forgiven.
- Other Provisions: There are additional tax and accounting provisions such as:
- An employee retention tax credit for employers subject to full or partial suspension of business due to COVID-19
- The ability to delay payment of employer payroll taxes
- Modifications for rules around net operating losses
- Modifications for rules around corporate AMT (alternative minimum tax) credits
- A temporary increase in the limitation on interest deductions imposed by the Tax Cuts and Jobs Act
Partner with Your Tax Professional
As with any decision involving taxes, consult with your tax professional on considerations and impacts to your specific situation. Your financial advisor can partner with them to provide additional financial information that can help in the decision-making process.
Work with your Edward Jones financial advisor to consider key aspects of the CARES Act as part of your financial strategy.