On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The nearly 900 pages of legislation is full of programs designed to help taxpayers navigate the economic hardships our country is facing. We’ve highlighted a few areas that are likely to impact you on a personal level.
Required Minimum Distributions Waived for 2020
Under the CARES Act, RMDs will be suspended for 2020 which would allow retirees to keep those dollars in their IRAs and 401(k)s and not pull dollars out during this market volatility.
Payment Recovery Rebates
One of the most widely discussed benefits of the CARES Act is the “Recovery Rebates.” Individuals with an adjusted gross income (AGI) of under $75,000 are eligible for a rebate of $1,200, while married couples can receive up to $2,400 if their AGI is below $150,000. Rebates are increased by $500 for each child under age 17. For those who exceed the income thresholds, rebates are still available, but are reduced by $5 for every $100 over the applicable income threshold.
The bill suspends the 50% adjusted gross income (AGI) deduction limit for 2020 and adds a $300 above-the-line charitable deduction.
Penalty Free Early Distributions from Retirement Accounts
Allows penalty-free distributions from retirement plans up to $100,000 for coronavirus-related expenses. Income tax would still be due on pre-tax dollars.
Payments Deferred for Student Loans
Federal student loan payments can be deferred until September 30, 2020. Interest will not accrue during this deferment period. Borrowers need to be proactive and contact their loan providers if they want to defer payments.
Tax Filing Extension
The IRS announced the extension of the tax filing deadline to July 15, 2020. Taxpayers can still file now and the IRS is still issuing most refunds within 21 days.
In addition to the highlights noted above, the CARES Act also provides economic relief for small business, as well as financial assistance for unemployment and healthcare programs. While taking steps to protect the health of all is the most important, the CARES Act is intended to help sustain families and businesses through this unprecedented time.
The full text of the legislation can be found here.
If you have any questions about how this bill could impact your financial plan, please contact your Petersen Hastings advisor.