The $2.2 trillion relief bill, known as the CARES act, signed by the President earlier this month includes many provisions intended to help individuals and business to deal with the financial fallout of the COVID-19 epidemic. As the biggest relief package ever passed by congress, it’s no surprise that the details can be quite overwhelming. In this blog post we summarize some of the highlights that we think will affect our clients.
We are staying on top of the latest developments, so if any of the aspects below are of further interest to you, please reach out to us for additional details. This is what we know as of April 8, 2020.
Individual relief checks:
- $1,200 relief checks for individuals with Adjusted Gross Incomes (before standard or itemized deduction) of up to $75,000 or $150,000 Married Filing Jointly (phase out up to $99,000 individuals or $198,000 married filing jointly)
- If you did not qualify for the rebate in 2019, but your income drops in 2020, you will get a rebate when you file your 2020 tax return.
- $500 for each dependent Under the age of 17.
- Eligibility determined by looking at your 2019 tax return, or 2018 if you haven’t filed 2019 yet.
- Those on Social Security, Supplemental Security Income, or Veterans Benefits are also eligible for a relief check
Tax and Retirement Plan Provisions
- 2019 tax filing and payment deadline has moved to July 15th, but second quarter estimated taxes for 2020 are still due June 15th as of now.
- Deadline for 2019 IRA/Roth IRA contributions has also been moved to July 15th
- Required Minimum Distributions are suspended for 2020. If you already took it in the last 60 days and would like to roll back in you can, except NOT for beneficiary IRA’s.
- Up to $100,000 can be withdrawn from a combination of IRA’s and employer plans (if allowed by plan) without penalty. These withdrawals will be considered taxable income it is still taxable income to you. These distributions must be done between January 1st and December 31st, 2020, and the distributions must be for related to COVID19 (i.e. not to be used for home improvements)
- Employers can update and amend their plans to allow larger employee plan loans. Up to $100,000 or 100% vested balance (used to be $50k/50% vested balance).
- Qualified Charitable contributions from IRAs are still permitted (although RMD’s are not required)
- A new above the line tax deduction of $300 for charitable contributions for those that don’t itemize
- Unemployment is expanded even for the self-employed. If you own a business call us so we can go through the provisions in more detail with you.
- Extended benefits include $600 weekly bump and unemployment benefits extended to up to 39 weeks.
Federal Student Loans:
- Student loan payments deferred until Sept. 30th, 2020, with no interest These deferred payments will still count towards forgiveness programs (including PLSF).
- Garnishments and debt collections are suspended.
- Employers can pay up do $5,250 for retroactive student loans with no income tax to employee.
- For Pell Grants and subsidized debt – won’t have to pay back for terms of no school and won’t count to lifetime limit.
Details continue to develop as our institutions adapt to address the new changes. We are tracking updates and will post any significant changes as needed. As always, please feel free to reach out to us for more information and to discuss how the new legislation might impact your financial plan.